How Do You Model Charitable Gifting Strategies in Scenario Analysis?

You can use the "Charity" field within the "Schedule A - Itemized Deductions" section to model gifting, as well as the "IRA Distributions" field to model Qualified Charitable Distributions (QCDs).



Charitable Giving in Scenario Analysis

To model charitable gifts, click on the file icon in the Charity row of Schedule A - Itemized Deductions.




This will bring up the Charity Worksheet, which lays out the different possibilities for types of charitable assets (cash, non-cash, capital gains donations) and organizations (50% limit and non-50% limit organizations) so that the program can accurately calculate the appropriate deduction based on Adjusted Gross Income.




By entering the amount of the deduction in the appropriate box, Holistiplan will automatically calculate the amount of the allowable deduction in a given year. Any unused deduction can be carried forward to future years for up to 5 years.

If you are unsure as to whether a charity is a 50% or non-50% limit organization, the IRS has a tax-exempt organization search tool with corresponding codes.

The process described above works for contributions directly to a charity, as well as for contributions to a Donor Advised Fund (DAF). By definition, DAFs are 50% limit organizations.



Qualified Charitable Distributions (QCDs)

Taxpayers who are over age 70.5 can direct charitable contributions to go directly from their IRAs to a recipient charity and not have that distribution count towards taxable income. Accordingly, taxpayers do not get a corresponding charitable deduction on Schedule A. To enter QCDs, access the IRA Distributions Worksheet by clicking on the pencil icon as shown below.





To model a QCD, enter the amount of the desired QCD in the "Taxpayer 1 and/or Taxpayer 2 Qualified Charitable Distributions" field. Enter the remaining taxable portion of the IRA distribution in the "Taxpayer 1 and/or Taxpayer 2 IRA Distributions" field.

In the example below, a total of $30,000 IRA distributions were made for Taxpayer 1. Of those $30,000, $10,000 were made in the form of a QCD. Therefore, $20,000 of the remaining $30,000 IRA distribution is taxable. You will see the highlighted note indicating $20,000 is being used as the taxable portion of IRA distributions to be used in the income tax calculation. 





2020 CARES Act Impact

  1. The CARES ACT removed any AGI limitations for cash donations in 2020, excluding contributions to donor-advised funds. For contributions to donor-advised funds, up to 60 percent AGI in cash and up to 30 percent AGI in appreciated assets can be contributed to a donor-advised fund.
  2. The CARES Act implemented a new rule that allowed taxpayers who claimed the standard deduction to take a $300 above the line deduction for contributions to charity for 2020. In 2021 that amount increased to $300 for single filers and $600 for married filing joint filers, though the deduction moved below the line.

These CARES-related rules for charitable deductions were not extended to 2022.