The CARES Act and Charitable Giving: What You Need to Know

The CARES Act and Charitable Giving: What You Need to Know

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020 and provides the following incentives for charitable giving.

1.) Non-itemizers eligible for $300 "Above-the-Line" deduction.

If you take the standard deduction, the CARES Act offers a special deduction that will reduce your taxable income. This deduction is available for cash gifts to qualified non-profit organizations, such as Legal Aid, and is limited to $300 per taxpayer ($600 for a married couple). Please note that cash gifts include money, checks mailed by the end of 2020, and credit card donations.  Gifts to donor advised funds do not qualify for this deduction.

2.) Higher Deduction Limits

For the 2020 tax year only, donors can deduct up to 100% of their adjusted gross income (AGI) for cash gifts to 501(c)(3) organizations like Legal Aid - up from 60% in 2019.  As a result, you may consider if it makes sense to make a larger gift, combine future gifts together, or accelerate the payment of a pledge in 2020 to receive a full income deduction this year. Corporations may deduct up to 25% of taxable income - up from 10%. The higher deduction does not apply to donations to a donor advised fund.

3.) Required Minimum Distributions Waived for 2020

Required minimum distributions (RMD) from retirement accounts are suspended for 2020. However, if you are 70 ½ or over, the tax code still permits you to transfer up to $100,000 from your IRA to non-profit organizations through a Charitable IRA Rollover.  The amount you transfer is not counted in your taxable income so it is an efficient option to support Legal Aid's urgent, transformative work.

This summary provides general information.  It is not intended as legal, accounting, or other professional advice.  For assistance in planning charitable gifts with tax and other financial implications, please consult your financial advisor or tax professional.