JFS Perspectives

Wednesday, May 20, 2020

CARES Act and Charitable Giving

The CARES (Coronavirus Aid, Relief, and Economic Security) Act is a new law designed to help nonprofits facing economic hardship during the coronavirus pandemic. The law includes several provisions designed to encourage charitable giving that we want you to know about.

Three New Tax Benefits to Donors 

Universal Deduction for Donations Up to $300 

The CARES Act grants taxpayers an above-the-line deduction for up to $300 in charitable donations starting in 2020. Married-filing-jointly taxpayers will get an above-the-line deduction of up to $600. Normally, you must itemize deductions to get a tax write-off for charitable donations.

Raising the Charitable Giving Deduction Cap

The law also lifts the existing cap on annual contributions for those who itemize, raising it from 60 percent of adjusted gross income to 100 percent. For corporations, the law raises the annual limit from 10 percent to 25 percent. Food donations from corporations would be available to 25 percent, up from the current 15 percent cap.

Required minimum distributions (RMDs) from qualified retirement plans are suspended

Due to the unlimited charitable deduction allowed for cash gifts this year – even exceeding 100% of AGI – donors can ask IRA holders to sell assets (above the amount of the RMD) and distribute the proceeds to them in cash. They can then turn around and donate the cash, realizing an offsetting income tax deduction for the full amount.

The opportunity to take advantage of these changes closes on December 31, 2020.

The tax information provided is general and educational in nature. Jewish Family Service of Colorado does not provide legal or tax advice. Always consult a tax professional regarding your tax situation.