CARES Act and Donor Impact
With unanimous bipartisan support, the CARES Act — Coronavirus Aid, Relief, and Economic Security Act — was passed and signed into law by President Trump on March 27th. It’s the largest economic relief bill in U.S. history and includes a variety of provisions to help individuals, families, and small businesses obtain economic relief. A couple of those provisions impact charitable giving depending on your personal circumstances.
If you take the standard deduction when you file your federal taxes, the CARES Act gives you a $300 above-the-line deduction for cash donations. What’s that mean? Your donation of up to $300 per taxpayer ($600 for a married couple) will be deducted from your adjusted gross income (AGI), reducing your taxable income. This happens before you take the standard deduction. This deduction is limited to cash contributions only.
For those who itemize their deductions, you are normally limited to deducting 60% of your AGI. The CARES Act waives that limit for cash donations and allows a donor to deduct 100% of your AGI for the 2020 tax year. Therefore, any charitable gift you make will be fully deductible from your 2020 taxes. In addition, any cash donations over and above 100% of your AGI may be carried over as deductions for up to five years.
In both cases, these deductions are for cash gifts only. Stock gifts still are deductible at 60% of AGI and unfortunately, cash gifts made to Donor Advised Funds are not eligible for either of these deductions.
Required Minimum Distributions Waived
The CARES Act has also eliminated the Required Minimum Distribution (RMD) requirement from IRA’s, defined benefit and 457 plans for 2020. However, donors can still utilize IRA assets to make qualified charitable distributions (QCD) to nonprofits in a tax-efficient manner.
If you would like more information on how you can take advantage of the provisions in the CARES Act contact on the members of our Development Team.