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.
New $300 Deduction for Qualified Charitable Donations
Individuals who take the standard deduction can now claim an above-the-line tax deduction for cash donations up to $300 to qualified charitable organizations.
Corporations’ 10% Limit Increased to 25% for 2020
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.
60% of AGI Limit Suspended for 2020
The usual deduction limit for cash gifts to public charities is 60% of adjusted gross income (AGI). For the 2020 tax year, individuals can deduct any cash contributions made to qualified charitable organizations, up to 100% of their adjusted gross income (AGI). The gift may be for any charitable purpose and is not limited to gifts for COVID-19 relief efforts.
Required Minimum Distribution (RMD) Waiver
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.
Donations to COVID-19 Community Response Funds
Donations to the CFSA’s COVID-19 Community Support Fund and COVID-19 Nonprofit Event Relief Fund, as well as 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 email@example.com.