Nonprofit CARES Act Charitable Contribution Changes for 2020

On March 27, the president signed into law the Coronavirus Aid, Relief and Economic Security (CARES) Act.  This legislation made several changes to charitable contribution limitation rules for individuals and corporations for 2020. This has been extended through 2021.

Cash Gifts – Individuals who take the standard deduction on their tax return (ie non-itemizers) can contribute up to $300 in cash gifts to most 501c3 charitable organizations and claim a new “above-the-line” deduction on their 2020/2021 taxes.  Previously, there was no charitable contribution tax deduction available for taxpayers who did not itemize deductions.  Gifts to donor-advised funds and supporting organizations are excluded. In addition, a deduction has been added for married couples in 2021 that allows them to take $600 as a universal charitable deduction whether the gift is itemized or not.

Charitable Deduction Limit – The usual deduction limit for cash gifts to public charities is 60% of adjusted gross income (AGI). For 2020 and 2021, gifts of cash to charity (excluding donor-advised funds and supporting organizations) are deductible to 100% of AGI. The gift may be for any charitable purpose and is not limited to gifts for Coronavirus relief.

Required Minimum Distribution (RMD) Waiver – The RMD is waived for IRA and other qualified retirement plan owners for the year 2020. This provision will permit IRA and other qualified retirement plan owners to retain funds in their IRAs. Because the markets declined substantially after the current RMD was calculated based on the plan value on December 31, 2019, Congress determined that it was beneficial to waive the RMD for 2020. Loyal donors may still wish to use IRA funds to make a qualified charitable distribution (QCD). The QCD is available up to $100,000 for individuals who are over age 70½.

This information is provided for your consideration only and is not to be considered tax advice.  Please consult your tax professional to determine what applies to your tax situation.