The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is the $2.2 trillion response bill that was signed into law on March 27, 2020. It includes several tax-saving provisions that can supercharge your charitable giving in 2020!
Temporary Universal Charitable Deduction
- A new above-the-line charitable deduction of up to $300 is available to taxpayers who do not itemize deductions.
- This deduction applies to qualified cash contributions made in 2020 only.
- This deduction does not apply to cash contributions made to donor advised funds (DAFs) or supporting organizations.
- This deduction does not apply to carry-over contributions.
Unlimited Deduction for Cash Gifts
- The CARES Act temporarily suspends the 60% charitable contribution deduction limitation for qualified cash contributions for taxpayers who itemize deductions.
- Individual taxpayers who contribute cash to a public charity may deduct up to 100% of their adjusted gross income after taking into account other contributions subject to charitable contribution limitations.
- The increased deduction is not automatic; it must be elected.
- This unlimited deduction does not apply to contributions made to donor advised funds or supporting organizations.
- Individual taxpayers can continue to carry forward any excess charitable contributions for five years. This is only effective in 2020.
Required Minimum Distributions (RMDs) from Qualified Retirement Plans are Suspended
- Required minimum distributions (RMDs) are waived for IRAs, including inherited IRAs, and other qualified retirement plans such as 401(k) and 403(b) plans.
- This is only effective in 2020.
- For 2021, The SECURE Act signed into law in December 2019 increased the RMD age from 70½ to 72.
IRA Qualified Charitable Distributions (QCD) Can Still be Made
- The QCD is still available for 2020 even though RMDs have been suspended.
- The minimum age for making a qualified charitable distribution (QCD) from your IRA is still 70½, and the annual limit is still $100,000.
- Alternatively, you can take cash distributions from your IRA and make deductible gifts in 2020, with no AGI limitation.
Increased Deductions for Corporations’ Charitable Gifts
- Corporations may now deduct charitable gifts up to 25% of the corporation’s taxable income (increased from 10%).
OPARC is not in the business of providing professional legal or financial advice. Donors should consult with their own tax, legal, or financial advisors to ascertain how these new CARES Act opportunities may complement their individual personal, philanthropic and tax planning objectives.
For more information, this page from the Association of Fundraising Professionals (AFP) site can provide more details. https://afpglobal.org/news/cares-act-charitable-giving-incentives
* Please note that the CARES ACT provisions highlighted above are only in effect for the 2020 tax year until otherwise noted.