Donations made by December 31 Receive Bigger Deductions

Note: the information on this page pertains to US Citizens or residents who file annual income tax returns.

Overview:

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress in March. This economic stimulus package makes 100% of cash donations deductible for those who itemize, and includes other new provisions that benefit both taxpayers and charitable organizations.

• Up to 100% of your adjusted gross income can be deducted if you itemize.
• Up to $300 deduction even if you don’t itemize.
• Limitations suspended on gifts to charity from Qualified Retirement Plans.

The Details:

Charitable Opportunities Under The CARES Act Stimulus Bill

$300 above-the-line charitable deduction.
Every taxpayer – whether you itemize or not – can take a deduction for up to $300 in cash gifts made when you file your taxes for 2020.

• Gifts must be made in cash
• Gifts must be to a public charity (not a private foundation or donor advised fund)
• Gifts must be made in 2020
• Charitable deduction is in addition to the standard deduction

Percentage limitation for cash gifts by itemizers eliminated for 2020.
Individuals who itemize when filing their 2020 tax return can deduct up to 100% of the adjusted gross income. This is increased from the 60% of adjusted gross income (AGI) deduction limitation in 2019. In addition, excess contributions can be carried forward for up to five years (subject to the standard 60% AGI limit).

• Gifts must be made in cash
• Gifts must be made to a public charity (not a private foundation or donor advised fund)
• The increased deduction must be elected on the tax return

Note: You will want to consult your own advisor for the most accurate, up-to-date information. Non-cash contributions may affect the use of this deduction for cash gifts.

Limitations on gifts to charity from Qualified Retirement Plans suspended for 2020.
Due to the unlimited charitable deduction allowed for cash gifts to charity this year, if you have qualified retirement assets in excess of anticipated future needs, you may request your IRA manager sell assets and distribute the proceeds to you in cash. You can then gift the cash to charity, receiving an offsetting income tax deduction for the full amount (up to 100% of AGI).

Corporate cash contribution limitation increased.
If you have a business and make charitable gifts of cash from your corporation, in 2020 the deduction limitation for these gifts has been increased from 10% to 25% of taxable income.

As with all financial decisions, you should consult your financial advisors for specific application of these opportunities to your personal situation. However, if you have questions or want to learn about creative giving opportunities, we would love to have a conversation.