CARES Act Charitable Giving Information
On March 27, 2020, Congress and the President enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, H. R. 748). The $2 trillion CARES Act provides massive relief for individuals, businesses, medical centers and nonprofits. Below is information related to charitable giving:
• The 90% of donors who do not itemize may take a tax deduction for cash gifts of up to $300 per person, $600 per couple. This may not be to a donor advised fund or supporting organization.
• This is an efficient way to give. For example, a couple in a 20% tax bracket can give $600 and reduce their tax liability by $120. The charitable organization receives $600 and the donor pays $120 less in taxes.
Increase of Cap on Charitable Gift Tax Deductions
• The usual deduction limit for cash gifts to public charities is 60% of adjusted gross income (AGI). For 2020, gifts of cash to charity (excluding donor advised funds and supporting organizations) are
deductible to 100% of AGI. The gift may be for any charitable purpose and is not limited to gifts for Coronavirus relief.
• Gift amounts beyond 100% of a donor's adjusted gross income can be applied up to five additional years.
• This provides an opportunity for additional tax savings for donors making large gifts. For example, if a donor makes a gift of $100,000 in one year and has an adjusted gross income of $100,000 for that year, there would not be any income tax liability. If the gift were $130,000, the donor could claim a deduction of $100,000 in the first year and claim a deduction for $30,000 in the following year.
Increase of Cap on Charitable Gift Tax Deductions for Corporations
• The cap on deductions for a charitable gift from a corporation increased from 10% to 25% of taxable income.
• This applies only to cash gifts.
• This provides an opportunity for additional tax savings for a corporation similar to the example above for the individual donor.
Required Minimum Distribution (RMD)from IRAs Suspended for 2020
• The RMD is waived for IRA and other qualified retirement plan owners for the year 2020.
• This provision will permit IRA and other qualified retirement plan owners to retain funds in their IRAs.
• Because the markets declined substantially after the current RMD was calculated based on the plan value on December 31, 2019, Congress determined that it was beneficial to waive the RMD for 2020.
• Loyal donors may still wish to use IRA funds to make a qualified charitable distribution (QCD). The QCD is available up to $100,000 for individuals who are over age 70½.
This information is considered current as of April 7, 2020 as a reference to the reader. Donors should consult a tax professional prior to making charitable decisions as a result of the language provided.