How the CARES Act May Affect Gift Planning in 2020

Recognizing that financial support to nonprofit organizations will suffer in the current economic environment – at a time when additional charitable support is greatly needed – the CARES Act has several provisions for both individual and corporate donors to encourage charitable giving.

1. New Charitable Deduction Available for Non-Itemizers

Under the CARES Act, taxpayers who do not itemize their deductions will be able to claim a charitable deduction of up to $300 for cash donations made in 2020. This means that you could add an additional $300 to your charity budget this year, recover a portion of it in tax savings, and help charities address extraordinary current needs.

2. Waiver of Retirement-Plan Penalties for Purposes Related to the Coronavirus

If you are under the age of 59½ and withdraw money from your retirement plan to cover expenses incurred by you or a family member related to treatment of the coronavirus, the 10% tax penalty will not apply, taxation of the distribution can be spread over three years, and you can add the amount you withdraw to the fund later without regard to contribution limits.

This allows retirement funds to be used for an immediate need while enabling retirement accounts to recover.

3. Increased Charitable Deduction Limits for Corporations

For the 2020 tax year, corporations can deduct up to 25% of the taxpayer’s taxable income for any cash contributions made to qualified charitable organizations.  Deductions for cash donations were previously limited to 10% of the taxpayer’s taxable income.

4. Charitable Deduction Limits Modified for Individuals

If you made a large cash gift in 2019, you could deduct it only to the extent of 60% of your adjusted gross income. For 2020, the CARES Act allows you to deduct cash gifts to the extent of your entire adjusted gross income.   The gift may be for any charitable purpose and is not limited to gifts for COVID-19 relief efforts.

5. Required Minimum Distribution (RMD) Waived

The Required Minimum Distribution has been waived for IRA and other qualified retirement plan owners for the 2020 tax year.  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 on December 31, 2019, Congress determined that it was beneficial to waive the RMD for 2020.  However, donors can still choose to use IRA funds to make a qualified charitable distribution.

6. Donations to COVID-19 Community Response Funds

Donations to the CFSA’s COVID-19 Community Support Fund and other regional efforts, qualify for the additional deductions established by the CARES Act.  You can also support these efforts with a qualified charitable distribution from your IRA, if you are age 70.5 or older.

We Are All In This Together!

If you need help determining how to support local and national relief efforts related to the COVID-19 pandemic, please don’t hesitate to call or email our team.  Although we are working remotely at this time, we are still here to assist you!  CFSA staff members can be reached at 520-770-0800 or at philanthropy@cfsaz.org