CARES Act Can Impact Giving in 2020 Tax Year
FOUNDATION
SIGNED INTO LAW in late March, the Coronavirus Aid, Relief, and Economic Security (CARES) Act included increased tax incentives – for both individuals and corporations – when it comes to charitable giving in the 2020 tax year.
“In a year that has negatively impacted the finances of many donors and the nonprofit organizations they support, we are grateful for these incentives, which can serve as a benefit to both,” said Mary Schneiter, director of the F.F. Thompson Foundation, Inc. “The incentives represent a win-win, and we truly hope individuals and corporations will take full advantage of them.”
Schneiter said because the CARES Act is several hundred pages long, donors are encouraged to consult with their advisors on how the opportunities it presents could complement their philanthropic and tax-planning objectives.
Below, however, is a summary of giving-related provisions, adapted from information provided by the Association of Fundraising Professionals:
New Charitable Deduction for Non-Itemizers
Taxpayers who take the standard deduction rather than itemizing their deductions will nevertheless be able to claim a charitable deduction of up to $300 for cash donations made in 2020.
Higher Deduction Limits
Individuals in 2020 will be able to deduct cash gifts to the extent of their entire adjusted gross income, and the deduction limit for corporations has been raised from 10 percent to 25 percent of taxable income. Schneiter noted the higher deduction limit does not apply if the gift was made to a supporting organization or for a donor-advised fund.
Required Minimum Distributions Waived in 2020
For 2020, there will be no mandatory distributions from retirement accounts (whatever the owner’s age), thus allowing those accounts to recover. The minimum age for making a tax-free transfer from an IRA to a charity remains at 70½, and the annual limit remains at $100,000. However, since cash gifts are deductible in 2020 to the extent of adjusted gross income, a person could withdraw and then contribute a larger amount—with the deduction offsetting the taxable withdrawal.
Waiver of Penalties When Retirement Funds Are Used for Coronavirus Purposes
If you are under age 59½ and withdraw money in 2020 from your retirement plan to cover expenses incurred by you or a family member related to treatment of the coronavirus, the 10-percent tax penalty will not apply. In addition, taxation of the distribution can be spread over three years, and the amount withdrawn can later be added without regard to contribution limits.
In addition to consulting with their advisors, donors are invited to reach out to the F.F. Thompson Foundation at 585-396-6155 or Foundation@thompsonhealth.org for help with gift-planning opportunities.