CARES Act and Charitable Giving
How the CARES Act Impacts Charitable Giving for 2020
On March 27, Congress passed and the President signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act. There are new tax advantages to charitable giving during 2020 included in the Act. Some of the key provisions are highlighted below.
New Universal Charitable Deduction for Non-Itemizers
If you are one of the 90% of taxpayers who takes the standard deduction, you can now get a charitable deduction on cash gifts of up to $300. This “above-the-line” deduction is an adjustment to income that will reduce a donor’s adjusted gross income (AGI), and thereby reduce taxable income. Donations to a donor advised fund (DAF) or supporting organization does not qualify for this new deduction.
Charitable Deduction Limit Increased to 100%
Individuals that itemize their taxes can deduct a much greater amount of their charitable contributions this year. Individuals can elect to deduct donations up to 100% of their 2020 AGI, up from 60% previously. Corporations may deduct up to 25% of taxable income, up from the previous limit of 10%.
The new deduction limits are only for cash gifts that go to a public charity, like Asbury University. The higher deduction limit does not apply to donations made to private foundations or organizations that manage DAF’s.
Required Minimum Distributions from Retirement Plans Waived
If you are 70 ½ or older, you will not have to take a distribution from your IRA or other qualified retirement plan in 2020. The required minimum distribution (RMD) has been an attractive way for donors to make a significant charitable gift directly from their IRA to a charity through a qualified charitable distribution (QCD) while avoiding taxable income. Even with the bill waiving the RMD, the tax benefit of the QCD remains and is available up to $100,000 for individuals.
Donors directing a QCD to charity during 2020 will still reduce their taxable IRA balance. This allows all taxpayers, itemizers and non-itemizers alike, to direct gifts from their IRA to charities in a tax efficient manner.
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This information is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor.