Amid uncertainty, keep the focus on what you do know

Dec 02, 2020

In the midst of a pandemic and in the wake of a presidential election, you are, no doubt, dealing with uncertainty about what the coming months might hold—and what it could mean for your giving.

 

In moments of uncertainty, it’s important to keep in mind all that you do know. This approach may not dispel all the unknowns, but it can inform the actions you take, offering key reassurances at a time of the year when you are likely making important decisions about your giving.

 

Here’s what we know

The current tax landscape: There is the chance, as always, that changes will be made to the tax code in the future. For the remainder of 2020, however, the tax treatment of your charitable giving is not expected to change. This knowledge should give you a measure of confidence in making your year-end decisions.
 

For example, the longstanding income tax deduction remains in place, with marginal tax rates the same as when the 2017 Tax Cuts and Jobs Act was passed. And you can still reduce capital gains taxes by donating appreciated assets now, regardless of any tax changes on the horizon. (More on this below.)
 

Key CARES Act provisions last through 2020. The CARES Act will remain in effect through the end of the year, though it may not be extended. The 2017 Tax Cuts and Jobs Act capped the deduction for cash contributions to public charities at 60% of a taxpayer's adjusted gross income (AGI). But the CARES Act raised that limit to public charities (other than donor-advised funds) to 100% for 2020. You can still meet your 60% AGI limitation through contributions into your donor-advised fund (DAF). You can then give another 40% of your AGI in cash donations to your favorite charities using the temporary CARES Act provision.
 

Market growth: Despite volatility this year, markets have shown great resiliency since March and have returned to record high levels. For many donors, this presents a golden opportunity for charitable giving: Securities you hold that have taken on substantial capital gains can be donated to a donor-advised fund to significantly reduce the capital gains taxes owed. This is a great way to take advantage of your wise investments. With us, the donation process is easy and, in most cases, can be done fully online.  
 

The unprecedented need will persist:  As the Center for Disaster Philanthropy points out, “COVID-19 is a social, economic and health-related disaster – a complex humanitarian emergency that is affecting the entire world.” The future course of the pandemic remains unknown, but it’s clear that substantial need will last for a long time. Vanguard Charitable donors have historically stayed attuned to all phases of disaster recovery, a strategy that will prove especially crucial this time around. In addition to short-term relief, it’s important to consider the intermediate- and long-term recovery stages, as well as the often-overlooked preventative stage, which can help to greatly reduce the severity of future crises.

 

Donor-advised funds are built for this moment: A Vanguard Charitable donor-advised fund is designed for times like this, and our donors have stepped up to meet the moment. Not only have you already granted nearly $1 billion since February alone, but you are well-positioned to match this immediate response with steady, ongoing support. If the economy worsens and other revenue sources for charities dry up, evidence suggests that those with donor-advised funds will continue to carry the load.
 

Finally, one of the most important things you know in this time of uncertainty is that the actions you take now will help determine the scope of your long-term impact—ensuring that you are able to respond for the full duration of the crisis.

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