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Donation Oportunities under CARES Act

Lissa McCain
Lissa Elena McCain

Treasurer

I find joy in giving donations

Sudha Murty

CARES Act Section 2204 amends IRS Code, adding new § 62(a) (22)

The new law allows all taxpayers to take a charitable deduction of up to $300, even if you do not itemize. If everyone gave “just” $300, such support would have a huge impact on goals, missions and those the charities serve. The law provides for a universal, above-the-line, deduction of up to $300 cash made by any taxpayer – whether they itemize or not. This will reduce taxable income for 2020. It makes giving less expensive for donors. This is up to $300 they won’t have to pay taxes on, even if they don’t itemize.

Conditions:

1. Gifts must be made in cash.

2. Gifts must be made to a public charity, not to a supporting organization, private foundation or donor advised fund.

3. Gifts must be made in 2020 (or after; this is not currently limited to just this year), and cannot be carried over from excess contributions made in a prior year.

Gifts are eligible for the above-the line deduction in addition to the standard deduction.

For those who do itemize their deductions, the new law allows for cash contributions to qualified charities to be deducted up to 100% of adjusted gross income for the 2020 calendar year.

Conditions:

  • Gifts must be made in cash to qualify for the 100% of AGI deductibility.
  • Gifts must be made to a public charity, not to a supporting organization, private foundation or donor advised fund.
  • The increased deduction is not automatic; it must be elected. It is likely the IRS will provide further guidance as the 2020 tax filing deadline approaches.

It’s possible the deduction could be disallowed if the donor also makes noncash contributions.

The new law temporarily suspends the requirements for required minimum distributions (RMD) for the 2020 tax year.

Many donors use their RMD to make a gift from their IRA. If you are 70½ or older, you can still make a gift from your IRA or name a 501(c)(3) charity as a beneficiary.

Donors should see this as an opportunity because there will no longer be a $100,000 limit on the amount they’re allowed to transfer to charity from their IRA. 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 donate the cash, realizing an offsetting income tax deduction for the full amount. This may be the only year they can do this. Up until now, donors had to wait to transfer IRA assets in excess of the $100,000 allowable annually until their death. And those assets could be assessed both income and estate taxes.

This is not intended as financial or legal advice but rather as information. (Taken from “DONATION OPPORTUNITIES TO CHARITIES UNDER THE CARES ACT”, By Claire Axelrad| April 13th, 2020|COVID-19 / Coronavirus, Nonprofit Sector, Philanthropy; Fundraising Coach at Bloomerang; Link to article provided by the Pennsylvania Downtown Center.)