The Coronavirus Aid, Relief, and Economic Security Act — known as the CARES Act — was signed into law March 27, 2020. It directs aid to individuals, states, hospitals, and businesses, and includes several provisions that directly impact charitable giving. Here’s a quick update:
Higher Deduction Limits for 2020 Tax Year
- You may claim an income tax charitable deduction of up to 100 percent of your adjusted gross income (AGI) for cash gifts made to public charities. (Previously, there was a deduction limit of 60 percent for cash gifts.)
- Gifts of stock, real estate, or any other non-cash items are subject to the previous limits, generally 30 percent or cost basis.
- The benefit does not extend to gifts made to donor advised funds, private foundations, or split interest trusts (charitable remainder trusts, charitable lead trusts, or pooled income funds). The legislation is ambiguous regarding cash-funded charitable gift annuities; consult your tax adviser.
- Charitable deductions for corporations have been expanded for 2020 only.
Suspension of Required Minimum Distribution Requirements (RMDs) from Qualified Retirement Plans
- If you would normally be required to withdraw funds from your retirement plans, you do not have to take your RMD in 2020.
- The minimum age for making a tax-free transfer from an IRA to a charity remains at age 70½ and the annual limit remains at $100,000.
- However, the 2020 tax-year expansion to the 100 percent AGI deduction limit creates the option of withdrawing funds and contributing a larger amount to charity, plus taking a charitable deduction to offset the taxable withdrawal.
- Please refer to the IRS publications on Charitable Contributions, Required Minimum Distributions, and Qualified Charitable Distributions, and check with your financial advisers to see how these rules apply to your plan and situation.
Charitable Deduction for Non-Itemizers
- Beginning in 2020, taxpayers who do not itemize can now claim a tax benefit up to $300 for outright cash gifts or cash gifts to charitable gift annuities (CGAs) made to public charities.
- The new deduction is not available for gifts to donor advised funds, private foundations, charitable remainder trusts, charitable lead trusts, or pooled income funds.
- Unlike the other charitable provisions in the CARES Act, this above-the-line deduction is permanent and will not expire after 2020 unless additional legislation is passed.
Contact Us and Your Advisers
- The CARES Act is extensive and includes numerous provisions that could benefit you financially. Consult your advisers about these provisions, and contact us if we can help you with any gift-planning opportunities.