Enacted on March 27th, the Coronavirus Aid, Relief, and Economic Security (CARES) Act is a stimulus response intended to mitigate the negative economic impact created by the COVID-19 pandemic. The CARES Act contains several provisions meant to encourage charitable giving this year. As you plan your year-end giving, please review these commonly asked questions to determine if the CARES Act could alter your philanthropy.
- Do you itemize your deduction?
If yes, please know that for cash contributions in 2020, a taxpayer may now deduct up to 100% of adjusted gross income (AGI). Previously, this was limited to 60% of AGI.
- Do you take the standard deduction?
The CARES Act allows for an ‘above the line’ deduction for charitable gifts made in cash of up to $300. If you plan to take the standard deduction in 2020, you could claim this deduction.
- What about Required Minimum Distributions (RMD) and Qualified Charitable Distribution (QCD)?
Individuals over 70½ may still donate up to $100,000 directly to charity annually as a QCD, though RMDs have been suspended for 2020. This year, individuals between the ages of 59½ and 70½ can receive benefits similar to a QCD by taking a cash distribution as income, and contributing that cash to a charity, as the CARES Act allows a taxpayer to deduct up to 100% of AGI in 2020.
- Have the tax benefits of contributing to my Donor Advised Fund changed?
No, the new incentives outlined above are not extended to organizations sponsoring donor advised funds, such as community foundations. Individuals may continue deducting up to 60% of AGI for cash gifts and up to 30% for appreciated securities contributed to donor advised funds.
- Are you interested in taking advantage of the 100% deduction of AGI or gifting your QCD to support your favorite nonprofit or cause through the Community Foundation?
Unfortunately, the increased cash donation limit of 60% of AGI to 100% is not available for cash gifts to donor advised funds, private foundation or supporting organizations. However, it would apply to cash gifts made to the Central Virginia COVID-19 Response Fund, one of the Foundation’s community impact funds, or a fund you may wish to establish in support of a particular charity or purpose. Please contact a member of the Philanthropic Services team to learn more about how you can capitalize on these tax incentives.
This information is intended to be educational. Please contact your Philanthropic Advisor if you have questions about your charitable fund, and please consult with your tax or financial advisor to learn more about this provision and its possible impact on your planning.