Charitable Gifting with the CARES Act
By Kay Anderson, CFP®
On March 27th, 2020, the Coronavirus Aid Relief and Economic Securities Act (CARES Act) was signed by the President to provide relief to the nation during the worldwide pandemic. The primary goal was to provide timely economic assistance for individuals, families, small businesses, and organizations that would be most impacted.
The CARES Act provides opportunities to support those charitable organizations close to your heart with some timely additional tax benefit if completed before year-end.
For those using a standard deduction: a cash donation up to $300 per taxpayer ($600 for a married couple) to a qualified organization is available as an “above the line” adjustment reducing adjusted gross income (AGI), and thereby reducing taxable income. A donation to a donor-advised fund does not qualify for this new deduction.
For those itemizing: Both individuals and corporations that itemize can deduct a much greater amount of their 2020 contributions. Individuals can elect to deduct donations up to 100% of adjusted gross income (up from the previous limit of 60%). Corporations may deduct up to 25% of taxable income (up from the previous limit of 10%).
The deduction is available for cash gifts directly to a charitable organization. Gifts of appreciated securities and those made to a donor-advised fund or private foundation are still deductible at the prior limits.
To preserve retirement account assets and reduce taxable income for 2020, the required minimum distribution was waived for the year. Those over the age of 70 ½ are eligible to complete a Qualified Charitable Deduction (QCD) allowing individuals to donate a maximum of $100,000 from a qualified account directly to a charity of choice.
An individual over the age of 59 ½ may take a cash distribution of up to $100,000 from a qualified account with no penalty. With the increased deduction of up to 100% of AGI, subsequently donating the cash to a qualified charitable organization will offset any tax attributable to the distribution.
Should you have any questions or would like to review your options for charitable and tax planning, please reach out to your advisor team. We welcome your call. Stay healthy and stay safe!
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