COVID-19: The CARES ACT and Charitable Giving
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on March 27, 2020, providing unprecedented government relief in response to the COVID-19 pandemic. The law contains provisions that are relevant to charitable giving, including:
- A temporary above-the-line charitable deduction available for donors who do not itemize deductions on their federal taxes. The CARES Act provides for a maximum deduction of $300 for cash charitable contributions for taxpayers that elect not to itemize their deductions on their tax returns. As with those who itemize, the deduction does not apply to contributions made to a donor advised fund or a supporting organization.
- A temporary lifting of the adjusted gross income (AGI) limitation for cash gifts made by individuals to certain charitable organizations. Normally, an individual is limited in the amount of charitable gifts that she may deduct from her federal income taxes in a tax year. For example, taxpayers are typically not able to deduct more than 60 percent of their AGI for cash gifts made to public charities (for those taxpayers who itemize their deductions). Under the CARES Act, the 60 percent AGI limit will not apply for charitable contributions made in cash during 2020, meaning of their taxpayers who itemize may deduct up to 100 percent AGI for qualifying charitable gifts made this year. This enhanced giving incentive applies to cash contributions only and does not apply to contributions to a donor advised fund or a supporting organization.
- A temporary change to the distribution requirements for individual retirement accounts (IRA). Typically, an IRA owner is required to take required minimum distributions (RMD) from a retirement account when that owner reaches a certain age (either 70 ½ or 72 years of age). The CARES Act waives the requirement for IRA owners to take RMDs in 2020. This temporary easing will potentially help retirement accounts recover from steep stock market losses in the first quarter.
For a more detailed description of the CARES Act, please click here.
We hope this summary of the CARES Act’s key provisions is helpful, and that it can serve as a starting point for conversations about how we can help you make the most of your charitable giving. If you have any questions or would like additional information, please contact Deborah Rothstein, Vice President for Development at firstname.lastname@example.org or 860-548-1888.
DISCLAIMER: The information provided herein does not, and is not intended to, constitute personalized financial or legal advice. The contents of the article are for general informational purposes only, and should not be relied acted upon without specific professional legal or financial advice, based upon an individual’s situation. As always, donors should consult with their tax and legal advisors when considering making a charitable gift.