How the CARES Act Impacts Charitable Giving for 2020 and Benefits You!
COVID-19 Stimulus Package / CARES Act
CARES Act for Nonprofits – Friday, March 27, 2020, the Congress passed and the President signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, an economic stimulus package legislated to provide immediate relief for nonprofits (learn more about the impact COVID-19 has on Neuro Diverse Living).
The inclusion of an expanded charitable giving incentive is a critical acknowledgment by Congress that the work of nonprofits like Neuro Diverse Living provides essential services.
Now more than ever, families and caregivers with grown adult children with Autism need viable options for the life-long housing and care their loved ones will need.
Here’s How it Works
The bill makes a new deduction available for up to $300 per taxpayer ($600 for a married couple) in annual charitable contributions. This is particularly beneficial to people who take the standard deduction when filing their taxes (in other words 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” adjustment to income that will reduce your Adjusted Gross Income, and thereby reduce taxable income.
To qualify, you would have to give a donation to a qualified charity. If you have already made your donation since Jan. 1, that contribution counts toward the $300 cap. A donation to a Donor Advised Fund does not qualify for this new deduction.
Also part of the bill, individuals and corporations that itemize can deduct much greater amounts of their contributions.
Individuals 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%.
Corporations may deduct up to 25% of taxable income, up from the previous limit of 10%.
The new deduction is only for cash gifts that go to a public charity. If you give cash to, say, your private foundation, the old deduction rules apply. And while the organizations that manage Donor Advised Fund’s are public charities, you do not get the higher deduction for donating cash to your Donor Advised Fund. These new limits do not apply to gifts of appreciated stock.
If your assets are substantial enough that you can give more than your income this year, you won’t lose the deduction for the excess amount. You can use it next year, as has always been the case.
Required Minimum Distributions for individuals over age 70 ½ is suspended until 2021. This includes distributions from defined benefit pension plans and 457 plans. The Required Minimum Distribution is an attractive way for donors to make a significant charitable gift directly from their IRA to a charity through a Qualified Charitable Distribution while avoiding taxable income.
The suspension of the Required Minimum Distribution may dampen somewhat the incentive for a donor who makes a gift from their IRA to count toward that minimum. However, the tax benefit of the Qualified Charitable Distribution remains.
The takeaway - donors directing a Qualified Charitable Distribution to charity this year (up to $100,000 per individual) will still 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.
For more information, please contact our Donor Care team at firstname.lastname@example.org.
- To qualify, you would have to give a donation to a qualified charity. Neuro Diverse Living is a qualified charity!
- Also part of the bill, individuals and corporations that itemize can deduct much greater amounts of their contributions.
- Donors directing a Qualified Charitable Distribution to Neuro Diverse Living this year (up to $100,000 per individual) will still reduce their taxable IRA balance.
Take Advantage Of This One-Time 2020 CARES Act Donation Today And Help Neuro Diverse Living Achieve It's Mission of Providing Safe & Sustainable Housing & Employment Options for Adults with Autism or other Intellectual Developmental Disabilities.
This information is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in any examples are for illustrative purposes only. References to tax rates include federal taxes only and are subject to change. State law may further impact your individual results.