On March 27, 2020, Congress and the President enacted a vast economic stimulus package called the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, H. R. 748). In addition to providing relief for individuals, businesses, medical centers and nonprofits, the $2 trillion CARES Act made the following changes to the tax code that are relevant to charitable giving: ▪
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Allows a charitable deduction of up to $300 per taxpayer: Non-itemizers may deduct from their AGI up to $300 for cash gifts to public charities. It is an “above-the-line” deduction for taxpayer’s taking the standard deduction that will reduce their AGI and thereby reduce taxable income. It is not available for gifts to donor advised funds, private foundations (other than private operating foundations) and supporting organizations, nor for cash deductions carried forward from prior years. Increases limit on deductions for charitable contributions of cash to public charities from 60% to 100% of the individual’s AGI: Those who itemize for tax year 2020 may elect to apply a 100% of adjusted gross income (AGI) limit to cash gifts to public charities. Gifts to donor advised funds, private foundations (other than private operating foundations) and supporting organizations are not eligible for this special election. The 100% limit is reduced dollar-for-dollar by other itemized charitable deductions meaning that a donor who deducts 30% of AGI in long term appreciated property gifts and elects the 100% of AGI limit for qualified cash contributions will be able to deduct up to 70% of AGI for qualified cash gifts, a total deduction of up to 100% of AGI. Thus, a taxpayer could effectively owe no federal income tax for 2020. Unused qualified cash gift deductions can be carried forward up to 5 years. The carryforward will be subject to the normal 60% of AGI limit, as are cash deductions carried forward from past years. Suspends required minimum distributions for most donors: The CARES Act waives required minimum distributions that are required to be made in 2020 from IRAs, 401(k)s, 403(b)s and most other defined contribution plans maintained by an employer for individuals. The waiver includes required minimum distributions that are due by April 1, 2020, because the account owner turned 70 ½ in 2019. Increases limit on cash contributions from corporations to 25%: The taxable income limit that applies to cash contributions made by corporations to public charities (and not donor advised funds, private foundations other than private operating foundations and supporting organizations) is increased from 10% to 25% for 2020. The usual 10% limit still applies to other charitable contributions by corporations, and those contributions reduce the 25% limit dollar-for-dollar. Qualified cash contributions in excess of the 25% limit can be carried forward for up to 5 years under the usual limits. Increases limit on contributions of food inventory to 25%: The limitation on deductions for contributions of food inventory by any trade or business is increased from 15% to 25% of the taxpayer’s taxable income for 2020.
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