COVID-19 Relief Strategy—CARES Act Allows $300 Above-the-Line Charitable Donation Deduction & Other Tax-Smart Ways to Give
Are you wondering what the tax benefits of the CARES (Coronavirus Aid, Relief, and Economic Security) Act might mean for you?
The new CARES Act is designed to help you, businesses and nonprofits facing economic hardship during the coronavirus pandemic. Read on to learn how a few key provisions of the CARES Act may affect you and your charitable goals.
The CARES Act, signed into law on March 27, includes provisions that affect both individual and corporate donors. Specifically:
New $300 Deduction for Qualified Charitable Donations
Individuals who take the standard deduction can claim an above-the-line tax deduction for cash donations to qualified charitable organizations, up to $300.
The IRA charitable rollover remains available in 2020. However, under the CARES Act the required minimum distributions (RMDs) are waived for 2020. This waiver of RMDs for 2020 is not limited to those who are affected by COVID-19. The waiver of RMDs applies to:
- Any IRA owner who is 72 or older in 2020
- Any IRA owner who turned 70 ½ in 2019, did not take an RMD in 2019, AND planned to take a delayed RMD by April 1, 2020
- All beneficiaries of inherited IRAs for decedents who died prior to 2020.
Any withdrawal from an individual’s IRA in 2020 is no longer deemed to be a RMD. And any individual who has already taken a RMD withdrawal in 2020 may now transfer what was withdrawn back into the IRA within 60 days of withdrawal date.
Donor-Advised Funds Not Affected
Deduction limitations for charitable gifts to donor-advised funds, private non-operating foundations, and supporting organizations were not changed under the CARES Act.
60% of AGI Limit Suspended for 2020
For the 2020 tax year, individuals can deduct any cash contributions made to qualified charitable organizations, up to 100% of their adjusted gross income (AGI). Deductions for cash donations were previously limited to 60% of the taxpayer’s AGI.
Corporations’ 10% Limit Increased to 25% for 2020
For the 2020 tax year, corporations can deduct up to 25% of the taxpayer’s taxable income for any cash contributions made to qualified charitable organizations. Deductions for cash donations were previously limited to 10% of the taxpayer’s taxable income.
We Can Help
Donors are grateful for their donor-advised funds now more than ever, as they are using their funds to give generously during this time of need. The $300 charitable deduction is also a great incentive to give to your favorite charity. For help determining tax-smart ways to support our relief efforts related to the COVID-19 pandemic, don’t hesitate to call. Our charitable experts are available by phone at (314) 951-1556 or click HERE to send us an email.