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How does the CARES Act Impact Charitable Giving?

April 23, 2020

The CARES Act introduces many important changes to charitable giving, including a universal charitable contribution deduction and a change to the AGI limit for cash donations.

If you’re looking to make a charitable contribution during the global coronavirus pandemic, make note of some important changes brought on by the CARES Act.

Key Provisions

  1. Universal charitable contribution deduction- The standard deduction increased significantly in 2017 under the tax law, making itemizing deductions less desirable. A new deduction is available for those who take the standard deduction rather than itemize, and it’s up to $300 per taxpayer. It is an above the line adjustment to income that will reduce a donor’s AGI and therefore reduce taxable income.
  2. The CARES Act lifts the 60% of AGI limit for cash donations made in 2020 (although there's still a 100% of AGI limit on all charitable contributions). Donations to donor advised funds and supporting organizations don't count. To constitute a qualified contribution, the contribution must be made during the 2020 calendar year regardless of whether the taxpayer’s taxable year is the calendar year. So any carryover into 2020 from 2019 will be subject to the old rules.
  3. Corporations can deduct charitable contributions up to 25% of their taxable income, up from the previous 10% limit.
  4. RMD- Required minimum distributions (RMDs) for those who reached age 70.5 in 2019 are not due until 2021, which dampens the incentive for a donor to make a qualified charitable distribution (QCD) from their IRA in 2020. The RMD is an attractive way for donors to make a significant charitable gift directly from their IRA while avoiding taxes. Although the RMD is waived for 2020, taxpayers otherwise required to take an RMD can still make a QCD up to the $100,000 limit.

Making a charitable gift at this time is important for many people coping with personal and financial hardships due to the pandemic. If you are able to give, we can help you get started.

Contact us for more information. Visit our Coronavirus Resource Center.

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