Published: November 24, 2020
This year the IRS tax filing deadline was moved to July 15 and IRA required minimum distributions (RMDs) were suspended. That’s what a hundred-year pandemic can do, and while we don’t know if any more pandemic-related tax changes are on the horizon, no time like the present to start thinking about taxes.
Let’s start with charitable giving and GivingTuesday, a “global giving movement” held on the Tuesday after Thanksgiving, which this year is Dec. 1. The movement, which began in 2012 with the mission of building a more just and generous world, has raised millions of dollars and generated countless volunteer hours for nonprofits across the world.
Pick a cause or an organization to support, and at the same time you might also reduce your tax burden.
Support Charities and Save Money
For many of us, charitable giving is year-round, but we especially think about it at year’s end. Here are other ways to give.
If you have an Individual Retirement Account (IRA), you must begin withdrawing and paying ordinary tax income on funds from the account once you reach 70 ½ years old. But instead of withdrawing (and paying taxes on) the money from your IRA, you can tell the custodian of the account to send your withdrawal of up to $100,000 directly to a charitable organization.
This transaction is called a “Qualified Charitable Distribution" or QCD’s. Keep in mind that the check has to be cashed by Dec. 31 so take into account mailing delays and holidays shutdowns.
Two other ways to help charities and reduce your tax burden:
- Donate appreciated stock directly to a charity and take a deduction for the fair market value on the date of the transaction. Most organizations (other than churches and government) must apply to the IRS to become a qualified organization. Go to the IRS Tax Exempt Organization Search to find qualified organizations.
- Donate property other than cash and deduct the fair market value of the property at the time of the contribution. Keep in mind that charitable contribution generally cannot be more than 60% of your adjusted gross income.
Keep Donation and Medical Expense Receipts in One Place
During a recent Kendal Zoom meeting on taxes with Oberlin CPA Vance DeBouter, a member of Kendal at Oberlin’s finance committee, residents were encouraged to pull out a shoebox to keep tax receipts all in one place.
For older adults, medical records can pile up. We visit doctors and specialists more frequently, require supplemental medication or medical equipment, and maybe even participate in fitness classes or hire a nutritionist to teach us the do’s and don’ts of healthy living. It’s important to keep track of all those expenses because you might be able to deduct some of the expenses.
According to TurboTax:
Most taxpayers know that medical expenses are deductible but few of us ever actually benefit from the deduction. The catch? This deduction has two high hurdles:
- You must itemize deductions to write off medical expenses, and only about one-third of taxpayers have itemized in the past.
- Medical costs are deductible only after they exceed 7.5% of your Adjusted Gross Income (AGI) in 2020. So, if your AGI is $50,000, the first $3,750 ($50,000 x 0.075) of unreimbursed medical expenses doesn't count.
Medical and dental expenses that can be deducted include: fees to doctors, dentists, psychologists and non-traditional practitioners; residential nursing home care; dentures, hearing aids, wheelchairs and other medical equipment; and transportation costs for medical care.
In addition, residents of life plan communities such as Kendal at Oberlin may receive a significant tax deduction for the portion of their fees related to medical expenses. The amount of the medical deduction on monthly and/or entry fees is calculated annually by the community.
Beware of Scams
"Tax scams tend to rise during tax season or during times of crisis, and scam artists are using the pandemic to try stealing money and information from honest taxpayers," said IRS Commissioner Chuck Rettig.
The IRS “Dirty Dozen” list of tax scams for 2020 include fake charities, social media scams and threatening phone calls. “The scammer attempts to instill fear and urgency in the potential victim. The IRS will never demand immediate payment, threaten, ask for financial information over the phone, or call about an unexpected refund or Economic Impact Payment,” the IRS said.
If you get such a call (and it may be a robocall) immediately hang up or delete the voice mail without responding. “The IRS will send a notice, they will not call,” Vance reminded Kendal residents.
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In the past, Molly Kavanaugh frequently wrote about Kendal at Oberlin for the Cleveland Plain Dealer, where she was a reporter for 16 years. Now we are happy to have her writing for the Kendal at Oberlin Community.