In response to the health crisis facing our nation, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act in March 2020. In addition to providing individual stimulus checks, the CARES Act includes provisions that impact charitable giving.
Changes to charitable giving in 2020
Individuals who do not itemize their deductions can claim a deduction for up to $300 (up to $600 for a household filing jointly) in charitable giving. This new deduction reduces a donor’s adjusted gross income, resulting in a reduction of taxable income and tax savings.
100% Charitable Deduction Limit
For individuals who itemize, the usual deduction limit for cash gifts to public charities is 60% of adjusted gross income (AGI). For 2020, gifts of cash to charity are deductible to 100% of AGI. The gift may be for any charitable purpose and is not limited to gifts for Coronavirus relief.
Required Minimum Distribution (RMD) Waiver
The RMD is waived for IRA and other qualified retirement plan owners in 2020. This provision will permit IRA and other qualified retirement plan owners to retain funds in their IRAs. Congress determined that it was beneficial to waive the RMD for 2020. Loyal donors may still wish to use IRA funds to make a qualified charitable distribution (QCD). The QCD is available up to $100,000 for individuals who are over age 70½.
It’s important to note that the CARES Act charitable giving incentives only apply to cash donations made to public charities. Gifts of stock, real estate or personal property and gifts to donor-advised funds or private foundations will not benefit from CARES Act provisions.