The Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) passed on March 27, 2020 makes temporary changes to tax provisions and required minimum distribution rules in an effort to boost charitable giving to nonprofits and provide flexibility for retirement savings. These temporary changes are listed below, but this information should not be considered tax advice in any way. Please consult your tax and financial planning professionals to determine whether provisions in the CARES Act apply to you.
Tax incentives for charitable giving
- New $300 deduction for cash gifts to charities: For individuals who normally take the standard deduction rather than itemizing deductions for their income taxes, the CARES Act allows for up to a $300 deduction for cash gifts to nonprofits, in addition to the standard deduction. This deduction is claimed by a tax-paying unit, so if you are married and file jointly, the maximum deduction is still $300. Contributions to donor advised funds and charitable checking funds do not qualify for this additional deduction.
- 100% deductibility for cash gifts for those who itemize: For taxpayers who itemize their deductions, the limit on the deductibility of charitable donations has been raised from 60% of adjusted gross income (AGI) to 100% of AGI. The charitable gifts must be cash, not stock or other illiquid assets, and cannot be made to donor advised funds or charitable checking funds. Carry forward provisions for losses are unchanged by the CARES Act.
- Increased deductibility for corporate charitable giving: Charitable donations by companies is normally limited to 10% of the taxpaying entity’s taxable income, but the CARES Act raises that limit to 25% for cash gifts made in 2020. In addition, the deductibility limit on gifts of food by companies has been raised from 15% to 25% of taxable income.
- Important limitations: The giving incentives in the CARES Act are designed to quickly mobilize resources for nonprofits to provide essential services. For that reason, to be eligible for the favorable tax treatment under the CARES Act, charitable gifts must be cash, not stock, and cannot be made to donor advised funds, supporting organizations, or charitable checking funds.
No required minimum distributions from retirement plans in 2020
The CARES Act temporarily suspends required minimum distributions (RMDs) from retirement plans in 2020, allowing the assets to remain invested. Should you still wish to utilize your RMD as a qualified charitable distribution, you can direct a gift from your individual retirement plan directly to a nonprofit or create an immediate impact fund to accomplish your charitable goals.
We can help you make a difference
For more information about utilizing the CARES Act to maximize the assistance you can provide to the nonprofit community, please contact Jennifer Fust-Rutherford, Director of Gift Planning, at [email protected], or (502) 855-6953. Whether making a gift to the One Louisville: COVID-19 Response Fund or assisting specific charities directly, your charitable gift will make a difference to those in need.