HOW THE CARES ACT IMPACTS CHARITABLE GIVING FOR 2020

 

There are some key changes for the 2020 tax filing year that may be beneficial to you and your family during these difficult times. The U.S. Congress has passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide economic assistance and there are
some important changes that may make a difference regarding your charitable giving for this year:

ADDITIONAL INCOME TAX CHARITABLE DEDUCTION

You can deduct up to $300 per taxpayer ($600 for a married couple) in annual charitable contributions. This is available only to people who take the standard deduction (for taxpayers who do not itemize their deductions). It is an “above the line” adjustment to income that will reduce a donor’s adjusted gross income (AGI), and thereby reduce taxable income. A donation to a donor advised fund (DAF) does not qualify for this new deduction.

NEW CHARITABLE DEDUCTION LIMITS

As part of the bill, individuals and corporations that itemize can deduct much greater amounts of their contributions. 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 is for gifts that go to a public charity, such as Two River Theater. The old deduction rules still apply to gifts to private foundations. The higher deduction does not apply to donations directly to a DAF.

NO RMDS FROM YOUR IRA, BUT QCDS ARE STILL A SMARTER WAY TO GIVE

For individuals over age 70 ½ with IRA accounts, there are no Required Minimum Distributions (RMDs) this year. However, giving pre-tax funds out of your IRA through Qualified Charitable Distributions (QCDs) will still lower your future tax burden compared to giving cash. Donors directing a QCD to charity this year (up to $100,000 per individual) 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.

 

This information is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in any examples are for illustrative purposes only. References to tax rates include federal taxes only and are subject to change. State law may further impact your individual results.

 

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