The CARES Act offers stimulus to nearly every segment of the United States economy, and the importance of charitable giving during times of crises was not lost on lawmakers.
As we all watch the unfolding pandemic, it’s clear that our road to recovery will stretch far beyond local hospitals and health clinics. Nonprofits are already playing a part, and that role is sure to increase as the economic impacts seep into our communities and daily lives.
That’s why charitable giving is more important than ever, and the CARES Act made a few tax law changes in hopes of encouraging more giving. These changes are relevant for businesses and individual givers alike, so we wanted to share how the CARES Act might change your giving strategy in 2020.
60% of AGI Limit Waived & Corporate Limit Increased
Prior to the new CARES Act, deductions for cash donations were limited to 60 percent of the taxpayer’s Annual Gross Income (AGI). For the 2020 tax year, individuals can deduct any cash contributions made to qualified organizations up to 100 percent of their AGI. Additionally, corporate taxpayers can now deduct up to 25 percent (previously 10 percent) of their taxable income for any cash contributions made to qualified charitable organizations.
It is important to note that these increased limits under the CARES Act only relate to cash contributions, not gifts of stock, real estate or any other non-cash items. Additionally, gifts made to Donor Advised Funds, private non-operating foundations and supporting organizations, do not qualify. The increased limits only apply to contributions made to qualified public charities, such as your favorite nonprofit or a fund directed by the Community Foundation, such as the SW Washington COVID Response Fund.
$300 Above-the-Line Deduction for Cash Donations
The CARES Act also recognizes that every little bit helps. With a brand new “above-the-line” deduction of up to $300 for cash donations, it allows taxpayers who take the standard deduction to also receive a write-off from giving. These gifts must also be directed to public charities, such as a local nonprofit.
Required Minimum Distribution from Retirement Plans Suspended
While the CARES Act has suspended required minimum distributions (RMDs) from retirement plans like IRAs, the IRA charitable rollover is still available in 2020. While gifts to donor advised funds are not allowed, qualified charitable distributions (QCDs) up to $100,000 can be made to foundation-directed funds in a single year if you are age 70 ½ or older.
Deductions for Gifts to SW Washington COVID Response Fund
Our hearts go out to the individuals and organizations being affected by COVID-19. This is a critical time for so many, including local nonprofits like our food pantries, homeless shelters and healthcare facilities. These organizations are working tirelessly to get those most affected back on their feet, and we hope you’ll consider supporting their efforts in this time of need.
One way to do this is through the SW Washington COVID Response Fund, an emergency fund managed by the Community Foundation. This fund allows anyone to contribute to relief efforts in a meaningful way, and all cash donations qualify for the additional deductions outlined by the CARES Act. You can also support the fund with a qualified charitable distribution from your IRA.
Nonprofits can transform lives with the right resources. We see it every day at the Community Foundation. So, let’s respond to this shared challenge with generosity and put our resources to work where they’re needed most.
Please note: The Community Foundation for Southwest Washington is not a licensed tax advisor. Donors should work with their financial, tax or legal professional to determine the best charitable giving strategy for their situation.