CARES Act Increases Tax Deductibility of Charitable Donations
As we approach year-end, many of you may be thinking about your annual giving and tax consequences.
There are several provisions in the CARES (Coronavirus Aid, Relief, and Economic Security) Act that may impact the tax deductibility of your charitable giving. We’ve put together some of the available information for you. As always, please consult your tax advisor to see how this might apply to you.
The new law:
1. Allows all taxpayers to take a charitable deduction of up to $300, even if they do not itemize, i.e., this an above the line deduction in addition to the standard minimum deduction everyone receives.
2. Enables individuals who do itemize to deduct cash contributions to public charities (like Care for Real) of up to 100% of their adjusted gross income (AGI) for 2020. Previously a deduction equal to only 60% of AGI was allowed.
3. Gives businesses benefits too. They can deduct up to 25% of qualified charitable cash contributions from their taxable income. Before the CARES Act, this limit was 10%.
Unlike most CARES Act provisions, which expire at the end of 2020, the special charitable tax benefits listed above benefits will also be available for donations you make in 2021.
4. Suspends the required minimum distributions (RMD) for retirement accounts for the 2020 tax year. While you do not need to take the distribution, you still can make a charitable contribution from your IRA or name a charity as a beneficiary.
In addition, for people who do elect to make donations such donations, the $100,000 limit on the amount they’re allowed to transfer to a charity from their IRA is waived – even if it exceeds 100% of their AGI.
We hope this information will be helpful as you look ahead. As always, many thanks for your generosity which enables us to assist our neighbors in need