Will the CARES Act Boost My Tax-Wise Charitable Giving This Year? (Yes, in Three Ways!)
During the COVID-19 pandemic, we pray unceasingly for those individuals and their families who have contracted or passed away with this virus. We also remember those serving tirelessly on the frontlines of healthcare. Certainly, we’re all sensitive for those who have lost jobs, been furloughed, or seen their work hours reduced.
As this global crisis continues to unfold, one steadfast course of action for serving people is clear for Summit Leadership Foundation and our corporate and nonprofit partners: the on-going ministry of caring for and encouraging others is absolutely critical—and our efforts must be sustained. To provide a boost for these objectives, the Congress and President Trump enacted key provisions of the CARES (Coronavirus Aid, Relief, and Economic Security) Act to encourage your charitable gifts this tax year.
These major changes include the following:
- Gifts of Cash—CARES establishes a $300 “above-the-line” charitable deduction for taxpayers who do not itemize their deductions (instead they take the standard deduction on their tax returns). Thus it is estimated 90% of taxpayers will benefit from this feature.
- New Increased 100% Charitable Deduction Limit for Cash Gifts—You’ll recall that the deduction limit for cash gifts to eligible charities is 60% of your Adjusted Gross Income (AGI) (and gifts above that amount may be “carried over” to future tax years). For tax year 2020 gifts of cash will be deductible to 100 percent of your AGI (this does not include cash gifts to Donor Advised Funds or some other charitable concerns).
- You Don’t Have to Take that RMD from Your IRA in 2020 (So should I use those IRA funds for a Qualified Charitable Distribution?)—CARES specifically waives the requirement that you take a Required Minimum Distribution (RMD) from your IRA this tax year if you are age 72 and older (or were already taking an RMD at age 70 ½ under the tax law prior to the SECURE Act of 2019).
So you may still use your IRA (even at age 70 ½) to support your church and charities such as Summit Leadership with a Qualified Charitable Distribution (QCD). It is easy to do with a call to your IRA Custodian as you ask them to send a QCD check to eligible charities.
And it may still be tax-smart giving (especially if you are ineligible to itemize deductions) even in 2020 (up to $100,000 per IRA owner) as the QCD is not a taxable distribution from your IRA. Remember also that the QCD amount to the church or charity is not included in your adjusted gross income (AGI) for the year. As such, you may potentially avoid the loss of exemptions, deductions, credits and phase outs, AMT (alternative minimum tax), the 3.8% surtax on net investment income, and the increase in Social Security premiums for Medicare Part B and Part D. Please consult your CPA or financial advisor to determine whether your IRA is still the best source of charitable funds for your overall tax and giving strategy in 2020.