COVID-19 and a Legacy of Giving

Personal Money Planning |


By Gary Silverman, CFP®

Hard times have the habit of bringing out the best in many people. You can see it daily around you. Neighbor helping neighbor. Families coming together. Community reaching out and making a difference. Those with time give time; those with abilities give talent; those with money give, well, money.

Tucked away in the CARES Act (the bill that brought you the recent rebate checks) are some gems for the philanthropic folks. When the major tax update occurred a few years ago, most of us lost the ability to directly deduct our charitable contributions. In exchange the standard deduction almost doubled in size. For most this was a good thing.

Well, now Congress wants you to have your cake and eat it too. You can now take a deduction starting this tax year for up to $300 in charitable gifts (and you still get to keep that super-sized standard deduction). Admittedly, this is not something where you turn the tax savings into a nice vacation. For those in the 12% or 24% marginal tax bracket, you’ll save $36 or $72 if you give the full $300 this year. Then again, those are dollars you wouldn’t have gotten to keep otherwise.

Some people can give more; enough to blow past the standard deduction amount. There is a limit to this. Normally, only cash contributions up to a maximum of 60% of their AGI (adjusted gross income) can be deducted on a Schedule A. Now, another gem in the CARES Act raises the bar to allow qualified contributions of up to 100% of AGI. Not only that, but if they give more than that, the extra giving can be carried forward for up to five years of deductions.

So, for anyone who pays taxes, giving will be rewarded. Unfortunately, my favorite giving method, the Donor Advised Fund (DAF—which I’ve written about many times in the past), is not eligible for these extra tax savings. This is understandable since a DAF is often used to space out the time of the deduction and the time the end charity receives the money. In these times, charities desperately need that money now.

With COVID-19 and the fallout from it, donations are down for almost every charity. Significantly down. Quite understandably down. When you are out of work it is time to be helped, not give help…at least not financially. But for those of us who still have an income, let us consider what needs are out there and try to make up for those who cannot.

Of course, this might take many forms. You might have a sibling who is suffering. While you won’t get a deduction for it, their need is certainly as valid as an organization that is on an IRS approval list. Others of you have put money toward campaigns to help employees of a favorite restaurant or other establishment whose doors are closed. Meanwhile sewing machines are churning out facemasks that are being donated to those who otherwise would have to do without.

The key is that people are giving of themselves to help others. I’d like to hope that is the legacy of COVID-19.

Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing.