The CARES (Coronavirus Aid, Relief and Economic Security) Act, which was signed into law on March 27, 2020, provided economic relief to businesses and individuals affected by the COVID-19 pandemic.
If you are considering making charitable donations in tax year 2020, please be aware of provisions in the new law. Before acting on any of the provisions highlighted here, please consider discussing them with your professional advisors to determine their applicability to your individual tax situation.
Impact on Charitable Gifts Made in 2020
Are you itemizing deductions?
Contributions to public charities are generally limited to a percentage of a taxpayer’s adjusted gross income (AGI). For individuals who itemize, the new law lifts the cap on deductions for annual contributions from 60 percent to 100 percent of AGI for cash gifts to public charities in 2020. Any excess contributions available can be carried over to the next five years.
(Note: Gifts made to Donor Advised Funds (DAFs) do not qualify for the increased deduction.)
Taxpayers who claim the standard deduction – rather than itemizing their deductions – will be able to claim an above-the-line charitable tax deduction of up to $300 for cash donations made in 2020.
(Note: This deduction applies only to qualified cash contributions and does not apply to cash contributions made to DAFs or supporting organizations.)
If your situation allows, consider taking advantage of the $300 charitable deduction by making a gift to one of UNLV’s Student Emergency Assistance Fund or any other fund of your choice from this payment.
Interested in corporate giving?
For corporations, the deduction limit has been raised from 10 percent to 25 percent of taxable income in 2020 for cash gifts to public charities.
Impact on Retirement Accounts for 2020
The new law provides a temporary waiver of Required Minimum Distributions (RMD) for 2020 for some Individual Retirement Accounts (IRAs), including inherited IRAs and other qualified retirement plans such as 401(k) and 403(b) plans. This waiver will allow IRA owners age 72 or older to keep funds in their IRAs and other qualified retirement plans. For individuals who had to take an RMD for tax year 2019 before the April 2020 deadline, that requirement has been waived for the year. Individuals age 70½ and older can continue to make tax-free charitable gifts directly from their eligible IRAs through Qualified Charitable Distributions (QCDs).
Because of the new law – and current financial uncertainty and fluctuations in the financial markets – it is advisable to discuss your charitable giving options with professional advisors to determine the best strategy for you.