Presented by Mark Gallagher

With many individuals and families facing catastrophic hardships because of the COVID-19 pandemic, charitable giving to those most adversely affected has become increasingly important. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020, included tax provisions designed to incentivize individuals and companies to make charitable contributions in 2020. The Consolidated Appropriations Act, 2021, enacted in December 2020, extends these incentives through December 31, 2021. These charitable giving incentives do not require that donations be made to charities assisting in the pandemic.

Above-the-Line Charitable Deduction
For the 2020 or 2021 tax years, each taxpayer can take an above-the-line charitable deduction of up to $300 for certain charitable contributions. Typically, charitable contributions are deductible only for individuals and couples who itemize their deductions; however, this new deduction applies only to those taking the standard deduction. Most taxpayers use the standard deduction since the passage of the Tax Cuts and Jobs Act of 2017, which removed many itemized deductions.

Contributions to a donor-advised fund (DAF) are not eligible for this above-the-line deduction; therefore, to take this new deduction, taxpayers should verify they are contributing to an eligible charitable cause.

Income Cap Removed for Charitable Contributions
Although the above-the-line deduction is not available for those who itemize their deductions, the CARES Act did make changes to certain tax limitations for those who itemize to incentivize larger gifts. For 2020 and 2021, the deduction available on cash contributions to charitable organizations has been increased from 60 percent of a taxpayer’s adjusted gross income (AGI) to 100 percent. Taxpayers can carry donations greater than 100 percent of their AGI to future years.

This applies only to cash contributions and not to long-term appreciated assets, which enjoy long-term capital gain tax treatment. The charitable deduction for long-term appreciated assets is still capped at 30 percent of AGI. For corporations, the deductibility of cash contributions has been increased temporarily from 10 percent to 25 percent of taxable income.

Like the restrictions related to the above-the-line deduction, the removal of the AGI cap does not apply to gifts made to DAFs.

An Excellent Time to Give
With so many in dire need of assistance, it’s a wonderful time to help the community through charitable giving. As a bonus for their generosity, individuals and companies should be sure to use these new tax incentives.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com.

Authored by the Investment Research team at Commonwealth Financial Network.
© 2020 Commonwealth Financial Network®

In this video available at https://vimeo.com/428236152 , Brad McMillan, Commonwealth’s CIO, provides an update on the coronavirus pandemic, including the economic and market implications. The virus remains under control, with the case growth rate at about 1 percent per day and daily case growth at about 20,000 per day. But while we didn’t see any signs of a national wave of second infections, it was a different story at the local level. Infection rates started to tick up in some states, which is something we need to keep an eye on. The news on the economic side, however, was better. Thus far, the reopening has been happening faster and more successfully than most imagined. In fact, last week’s jobs report revealed 2.5 million jobs were created in May. With economists anticipating a loss of 7.5 million jobs, this result was certainly a positive surprise. Plus, we saw a bounce in consumer and business confidence, as well as a rise in consumer spending. The financial markets had been rising in response to this tailwind of good news, but then we saw some volatility at the end of the week. Is there reason to expect more turbulence ahead? Watch Brad’s video to learn more.

Presented by Mark Gallagher,

I would like to offer you the opportunity to hear thoughts from Brad McMillan, managing principal and chief investment officer at Commonwealth Financial Network®, our Registered Investment Adviser–broker/dealer.

In this video, available at https://vimeo.com/408420489, Mr. McMillan provides an update on the coronavirus crisis, including its effects on the economy and markets. With regard to the virus itself, we’re seeing signs of progress. This week, the daily spread rate dipped below 5 percent, and the number of new cases per day started to stabilize. With this good news on the pandemic front, the focus is shifting to how to reopen the economy. Here, the news is not as good. With more than 22 million jobs lost over the past several weeks and many businesses remaining closed, the damage is mounting. Mitigating measures, like the stimulus checks, are starting to take effect, but a recession is likely. How bad will that recession be, and what could it mean for the markets? Watch this video to learn more.

Mark Gallagher is a financial advisor located at Gallagher Financial Services at 2586 East 7th Ave. Suite #304, North Saint Paul, MN 55109. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 651-774-8759 or at mark@markgallagher.com.

Click link below to download a PDF of our Tax Organizer

2019 Tax Organizer (CLICK HERE)

The 2020 tax filing season is the 2nd year after the sweeping federal tax reforms passed by congress. Once again, many of our clients will be utilizing the standard deduction at the federal level, while still being able to itemize certain deductions at the state level. Bring us all of your pertinent 2019 tax documents and we will apply due diligence to enter you tax information to obtain the best outcome possible!

Breaking news – Minnesota legislators have partially aligned with the federal tax reform changes and the Department of Revenue has notified us that special refunds may be issued automatically to those affected by the changes!

Noteworthy Items:
1) Medical Expenses: If you can benefit from itemizing, the amount over 10% is deductible.
2) Health Insurance: If you buy your insurance through the MNSURE exchange, bring us a copy of the Form 1095-A.
3) H.S.A. Plans: If you’ve contributed or received distributions from a Health Savings Account, we will need forms 5498 and 1099-SA.
4) 529 Plans: MN has implemented a tax credit of up to $500 per year
5) Common Tax Docs Checklist: (See link above)
6) MN Special Refunds: Due to recent legislation, some of you may see special refunds issued for 2017 or 2018. These refunds are not the result of preparer error.