How the CARES Act May Affect Your Charitable Giving in 2020

The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, was designed to rescue the economy from the effects of the coronavirus pandemic and signed into law on March 27, 2020. Some of the provisions stipulated in the act are applicable to charitable giving and may affect your gift planning.

New Charitable Deductions for Non-Itemizers
Taxpayers who take the standard deduction, rather than itemizing, will be able to claim a charitable deduction of up to $300 for cash donations made to charitable organizations in 2020. According to The Joint Committee on Taxation from Congress, the $300 limit applies to the tax-filing unit.

According to the committee’s most recent report as of April 2020, “married taxpayers who file a joint return and do not elect to itemize deductions are allowed to deduct up to a total of $300 in qualified charitable contributions on the joint return.” This provision was inserted to encourage charitable giving this year.

Higher Deduction Limits
For the 2020 tax year only, donors will be able to deduct 100% of their entire adjusted gross income (AGI) by making cash gifts to public charities. Gifts to donor advised funds (DAFs) do not qualify. Deduction limits for corporations have been raised from 10% to 25%.

Required Minimum Distributions Waived in 2020
In 2020, there will be no required minimum distributions (RMDs) from retirement accounts, no matter the age of the owner. Donors age 70.5 and older may still make qualified charitable distributions from their IRA if they choose.

Waiver of Penalties When Retirement Funds Are Used for Coronavirus Purposes
If you are under the age of 59.5 and withdraw money from your retirement plan to cover expenses that you or a family member incurred related to treatment of the coronavirus, the 10% tax penalty will not apply. Taxation of the distribution can be spread out across three years and the amount withdrawn can later be added without typical contribution limits.

Contact Us and Your Advisors
The CARES Act includes numerous provisions that may benefit your specific financial situation. Consult your advisors about this legislation and contact us if we can help you with any gift-planning opportunities.

The information on this website is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income taxes include federal taxes only. State income/estate taxes or state law may impact your results.