What the CARES Act means for your charitable giving
Coronavirus Aid, Relief, and Economic Security (CARES) Act to help combat the far-reaching impacts of COVID-19. The bill provides increased tax incentives for charitable giving for both individuals and corporations, signifying an intent to stimulate philanthropy throughout America.
*A new temporary deduction in 2020 up to $300 for single filers, $600 for Married-filing-jointly taxpayers.
*Even if you have not itemized your charitable giving in the past, your cash donation will now count as an “above the line” deduction on your 2020 tax return.
*For taxpayers that still itemize their deductions, the adjusted gross income limit for charitable gifts of cash was increased from 60 percent to 100 percent.
*Taxpayers can make donations via cash, check, or credit card by December 31, 2020. Recordkeeping rules still apply for charitable gift deductions, such as receipts or donation letters from the organization.
*The deductions above are limited to donations to 501(c)3 public charities.
The CARES Act did not change the rules around the QCD, which allows individuals over 70½ years old to donate up to $100,000 in IRA assets directly to charity1 annually, without taking the distribution into taxable income.
However, remember that under the CARES Act an individual can elect to deduct 100 percent of their AGI for cash charitable contributions. This effectively affords individuals over 59½ years old the benefits similar to a QCD; they can take a cash distribution from their IRA, contribute the cash to charity, and may completely offset tax attributable to the distribution by taking a charitable deduction in an amount up to 100 percent of their AGI for the tax year.
If you’re planning a large donation in 2020, this may be a smart strategy as long as you are between the ages of 59½ and 70½ and are not dependent on existing retirement funds.
If you have already donated to a public charity in 2020, make sure you received supporting documentation for the donation. If you have yet to donate or have questions, contact your financial advisory, or CACF would be happy to help.
Happy Holiday, Doreen