Here are some ways you can help ease the burden on friends, family, and those in your community during the pandemic.
Financial management

Helping others during the pandemic

8 minute read
  •  
September 15, 2020
Financial management
Charitable giving
Article
Page
Family and relationships
RMDs
Roth IRAs

I was talking with my mom on the phone recently. Like many families, we haven’t been able to visit in person since the coronavirus pandemic began, so I’ve enjoyed our phone conversations. She was excited to fill me in on her latest project: making face masks for her church to donate to hospitals and other organizations in her area. She’s part of a well-organized group: Someone delivers fabric and templates to her home, and she assembles the masks and packs them in boxes. Then another volunteer collects them and delivers them where they’re needed. I knew she’d taken up quilting as a retirement hobby—a skill that, until now, she’d mainly used to make the occasional Christmas or birthday gift for a member of our family. It was awesome to hear how she’d translated that newfound skill into a valuable service to help keep people safe.

Translating inspiration into action

I’m extremely proud of my mom for finding a way to make a positive impact, and it got me thinking about what more I could be doing. As a financial advisor, I’ve seen firsthand how the pandemic is affecting clients and their families. I’m thankful to be in a position to help them by providing advice and guidance on how to navigate the financial challenges they’re facing. I’m also blessed to work with clients in fortunate circumstances who see the current situation as a call to action to help others. People are helping others in extraordinary ways, and many more want to help but don’t know where to begin. I realized one way I can help is by sharing information about how we can make things easier for those affected. So if you’re looking for ways to ease the burden on friends, family, and those in your community during the pandemic, here are some ideas.

Monetary gifts

The IRS allows you to gift up to $15,000 per individual per year without incurring a gift tax. Married couples can combine gifts for a total of $30,000 per person per year. These gifts can go to anyone—family members, friends, or even your favorite barista or local restaurant owner who’s seen a significant drop in business. If you know someone who’s fallen on hard times, you can give them money directly as a form of support. Of course, if you want to give more than the annual exclusion amount, you can. Just note that you’ll need to file a gift tax return, and the additional amount will count against your lifetime gift tax exemption ($11.4 million).

Need guidance on giving?
Our advisors are here for you.

Medical or tuition expenses

In addition to the annual gift tax exclusion, there’s an unlimited gift tax exclusion for qualified medical and tuition expenses. There’s an important restriction on this tax-free gift, however: You have to make the payment directly to the medical or educational institution. You can’t reimburse the recipient for payments they’ve made on their own. If you know someone who’s sick or needs help with their health insurance premiums, paying their bills directly is a great way to offer assistance.

Charitable contributions

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides additional incentives for charitable giving. A new “universal deduction” allows for a charitable deduction of up to $300 for eligible individuals who do not elect to itemize deductions for 2020. The $300 limit per filing unit applies regardless of filing status. If you do itemize, you can deduct cash contributions of up to 100% of your adjusted gross income for 2020 (it’s normally limited to 60%). Theoretically, this means you could offset all your income and have zero tax liability if you give a large enough amount.

Qualified charitable distributions (QCDs)

Thanks to the CARES Act, required minimum distributions (RMDs) have been temporarily waived for 2020. Under normal circumstances, you’d be required to start taking minimum distributions from your tax-deferred retirement accounts when you reach age 72 (age 70½ if you turned 70½ before 2020). Although RMDs aren’t required in 2020, you’re still allowed to make a tax-free donation (up to $100,000) to a qualified charity directly from your IRA if you’re over age 70½. If you’re looking for organizations that are helping those in need during the pandemic, Vanguard Charitable has a wealth of resources and vetted charities to help narrow your search. Although making a QCD is still an option, the tax incentives for charitable giving from taxable accounts will likely be a more attractive option for most people. Here are a few reasons why you still might want to take a QCD in 2020, but be sure to consult an advisor or tax professional about your unique situation:

  • You anticipate that skipping your RMD in 2020 will increase your taxes in future years. Taking a higher RMD in the future could also increase:

    • Your premiums for Medicare Parts B and D.
    • The taxable portion of your Social Security benefit.
    • Your qualified dividend income and long-term capital gains taxes.
  • You expect your tax rate to increase in the near future or intend to move to a state with higher income taxes.
  • You want to make a charitable donation but don’t have enough taxable assets to fund the donation.

Cash donations plus a conversion

Since RMDs can’t be converted to Roth IRAs, 2020 presents a unique opportunity for individuals over age 72 to reduce their taxable IRA balance with a Roth IRA conversion and a cash donation from a taxable account. The Roth conversion would be taxable, but the cash donation could offset some of the tax liability if you itemize your deductions. This could have better short- and long-term planning benefits than taking a QCD.

There’s more to it than money

If you’re not in a position to provide financial help, that’s OK. Like my mom, you can find other ways to make a difference with the resources, skills, and time you have. Think creatively. Those affected by the pandemic will appreciate anything you can do to help.

Ready to make a difference? We'll help you get the most out of your giving.

Most Viewed

Vanguard Core-Plus Bond Fund features the diversification of bond funds with the potential for higher yields through proven expert management.
Vanguard Core-Plus Bond Fund launches
Vanguard Core-Plus Bond Fund features the diversification of bond funds with the potential for higher yields through proven expert management.
Vanguard news
Company news

Start with this step-by-step guide to opening a personal investment account, such as a general investing brokerage account or an IRA.
Ready to invest? See how to open an account
Start with this step-by-step guide to opening a personal investment account, such as a general investing brokerage account or an IRA.
Vanguard news
Start investing

Vanguard finds it will take a lot more inflation than we expect to affect diversification in a balanced portfolio.
Inflation, diversification, and the 60/40 portfolio
Vanguard finds it will take a lot more inflation than we expect to affect diversification in a balanced portfolio.
Vanguard news
Market & economy insights

A U.S. debt default, unlike a government shutdown, would be unprecedented. Here’s why we don’t think it will occur.
Potential U.S. debt default: Why to stay the course
A U.S. debt default, unlike a government shutdown, would be unprecedented. Here’s why we don’t think it will occur.
Vanguard news
Market & economy insights

Could inflation at rates we’ve seen in 2021 persist in 2022 and beyond? It’s not our base case.
Inflation beyond the current spike
Could inflation at rates we’ve seen in 2021 persist in 2022 and beyond? It’s not our base case.
Vanguard news
Market & economy insights

With updates based on Vanguard’s principles of investing success, the 4% rule can help FIRE investors achieve success in retirement.
Fueling the FIRE movement: Updating the 4% rule for early retirees
With updates based on Vanguard’s principles of investing success, the 4% rule can help FIRE investors achieve success in retirement.
Article
Early retirement

All investing is subject to risk, including the possible loss of the money you invest.

Diversification does not ensure a profit or protect against a loss.

Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.

The services provided to clients who elect to receive ongoing advice will vary based upon the amount of assets in a portfolio. Please review Form CRS and the Vanguard Personal Advisor Services Brochure for important details about the service, including its asset-based service levels and fee breakpoints.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP® and Certified Financial Planner™ in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.