08 Dec 2020
Posted by Tom Virkler 
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My Mother didn’t tolerate gambling in any form. I couldn’t even play marbles for keeps. If someone solicited her for a lottery ticket, she simply donated the money to the cause. Her conviction still resonates in my life choices.
Her influence was strongly tested when I found myself in the Florida panhandle after Thanksgiving in 2012 with a fellow partner at a time the state lottery was boasting a prize of $587,000,000 and some change. After agonizing sufficiently, I decided, “Principles be darned, we’re talking about some real money here,” and I bought two tickets.
In deference to my Mom I did pledge that if I won, I would contribute the maximum annual charitable income tax deduction amount to non-profit organizations. The max at that time was 50% of a taxpayer’s adjusted gross income. So when my number was not drawn some 293 charities around the globe were denied a $1,000,000 donation from my anticipated private foundation.
The annual deduction was increased to 60% of AGI under the 2017 Tax Cuts and Jobs Act. But there is now additional opportunity under the CARES Act for wealthier clients doing some year-end planning.
Charitable deductions made in 2020 can be taken for up to 100% of AGI.
This one-time increased “deduction window” until December 31, provides several planning opportunities:
1) The increased contribution can be used to initiate or beef-up a charity-owned policy (check with us for the financial underwriting guidelines for coverage to be owned by a charity).
2) The tax savings can be used to jump-start or pay further premiums on policies purchased (often by an irrevocable trust) to replace in an estate the wealth donated to a charity.
3) The tax savings can be used to reduce or offset the taxation of an IRA-to-Roth IRA conversion (or any other transaction resulting is an income tax liability).
Whatever the result, remind clients that to be applied toward the 100% deduction amount, gifts must be completed before the end of the year. For gifts made by check, this usually includes any that are delivered or mailed by December 31. Check with legal and tax advisors to be sure.
Better yet, check with your Mom to be sure the money donated was raised in a manner acceptable to her.
Please call with any questions concerning this issue or other tax and planning matter that arise in your casework at tom@cpsadvancedmarkets.com or 706-354-0401.
