CARES Act Benefits
The Coronavirus Aid, Relief, and Economic Security (CARES) Act is a $2 trillion economic stimulus package that expands charitable giving incentives for donors. As always, we recommend that you consult with your financial advisor to discuss your specific tax situation.
New $300 Deduction Available for Qualified Charitable Donations in 2020: The bill makes a new deduction available for up to $300 per taxpayer ($600 for married couples) in annual charitable contributions. This is available to people who take the standard deduction when filing their taxes (for taxpayers who do not itemize their deductions). It is calculated by subtracting the amount of the donation from your gross income. It is an “above-the-line” deduction to income that will reduce your adjusted gross income, thereby reducing taxable income. To qualify, you would have to give a donation to a qualified charity like the Wellesley Fund.
Individuals’ Charitable Deduction Limit Increased Up to 100% for 2020: As part of the bill, individuals who itemize can elect to deduct cash contributions up to 100% of their 2020 adjusted gross income on itemized 2020 tax returns. This is up from the previous limit of 60%.
The new deduction is only for cash gifts that go to a public charity such as the Wellesley Fund. Deduction limitations for charitable gifts to donor-advised funds, private non-operating foundations, and supporting organizations were not changed under the CARES Act. These new limits do not apply to gifts of appreciated stock.
Required Minimum Distributions Waived for Most Donors in 2020: Donors directing a qualified charitable contribution from their IRA to charity this year (up to $100,000 per individual) will still be able to reduce their taxable IRA balance. This allows all taxpayers, itemizers and non-itemizers alike, to direct gifts from their IRA to charities in a tax efficient manner. However, required minimum distributions (RMD) for individuals over age 70.5 are suspended until 2021, including distributions from defined benefit pension plans and 457 plans.
Please consult a qualified tax advisor.