In March of 2020, the CARES (Coronavirus Aid, Relief, and Economic Security) Act was signed into law. This Act is hundreds of pages long and includes many provisions that can impact the finances of a person/family in a variety of ways. Important to the work we do at Boys & Girls Clubs of Sarasota and DeSoto Counties, this Act contains a number of provisions that charitable financial planners and fundraisers should be aware of.
A New Charitable Deduction is Available for Non-Itemizers.
Taxpayers who do not itemize (92% of filers) can receive an additional $300 (possibly up to $600 for a married couple filing jointly, though this remains a debate among tax professionals) of “above-the-line” deductions for cash contributions to qualifying charitable organizations (WFAA qualifies). For instance, a family that would take the standard deduction of $24,800 in 2020 could now have total deductions of $25,100 (possibly $25,400). This $300 (or $600) “above-the-line” benefit is only for non-itemizers and should be available in 2020 and beyond.
Retirement Plan Penalties Waived in 2020.
If you are under age 59.5, withdrawing money from an IRA typically comes with a 10% penalty on top of income taxation. The CARES Act allows for up to a $100,000 “coronavirus-related distribution” which is still taxed. That taxation can be spread over three years or be tax-free if the distribution is repaid to the IRA within three years.
Charitable Contribution Limits Suspended in 2020.
Cash contributions to public charities are typically limited to 60% of a taxpayer’s adjusted gross income (AGI). The CARES Act allows for cash contributions to public charities to be deducted up to 100% of AGI in 2020. Excess contributions can still be carried over for up to an additional five years.
Required Minimum Distributions (RMDs) Waived in 2020.
As mentioned in the “What should I know about the Secure Act” attachment in this post, RMDs now begin at age 72. For the year 2020, the CARES Act will not require any mandatory distributions, no matter the age of the account owner. Tax-free QCD gifts continue to be allowed beginning at age 70.5 and can still make financial sense for a charitably minded person.
Increased Charitable Deduction Limits for Corporations in 2020.
Contribution limits for corporations has been 10% of taxable income. For 2020, that limit has been raised to 25% for cash contributions.
There are a great many exceptions to these rules and as such, for in-depth tax related conversations it is always a best practice to encourage a prospective donor to engage with a tax professional. If you have additional questions, please contact us at 941-366-3911.