CARES Act for Nonprofits – On Friday, March 27, Congress passed and the President signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion economic stimulus package legislated to provide immediate relief for nonprofits. You can help give families affected by cancer hope when you make a donation to Swim Across America.
Details About CARES Act
The inclusion of an expanded charitable giving incentive is a critical acknowledgement by Congress that the work of nonprofits like Swim Across America are essential services. Indeed, cancer isn’t taking a break and our mission continues to be critical as we raise funds and provide grants to our world-class beneficiaries. It is the first time Congress has passed this type of giving incentive in response to disaster or national emergency.
Here Are The Highlights
IMPORTANT: New Deduction Available: Up to $300 per tax filing in annual charitable contributions. It is an “above the line” adjustment to income that will reduce a donor’s adjusted gross income (AGI), and thereby reduce taxable income. This is particularly beneficial to people who take the standard deduction when filing their taxes (in other words for taxpayers who do not itemize their deductions). A donation to a donor advised fund (DAF) does not qualify for this new deduction.
New Charitable Deduction Limits: As part of the bill, individuals and corporations that itemize can deduct much greater amounts of their contributions. Individuals can elect to deduct donations up to 100% of their 2020 AGI (up from 60% previously). Corporations may deduct up to 25% of taxable income, up from the previous limit of 10%. The new deduction is for gifts that go to a public charity, such as Swim Across America. The old deduction rules apply to gifts to private foundations. The higher deduction does not apply to donations directly to a DAF.
If your assets are substantial enough that you can give more than your income this year, you won’t lose the deduction for the excess amount. You can use it next year, as has always been the case.
Required Min. Distributions Waived in 2020 for Most Donors: RMD for individuals over age 70 ½ are suspended until 2021. This includes distributions from defined benefit pension plans and 457 plans. The RMD is an attractive way for donors to make a significant charitable gift directly from their IRA to a charity through a qualified charitable contribution (QCD) while avoiding taxable income. The suspension of the RMD may dampen somewhat the incentive for a donor who makes a gift from their IRA to count toward that minimum. However, the tax benefit of the QCD remains.
The takeaway – donors directing a QCD to charity this year (up to $100,000 per individual) will still reduce their taxable IRA balance. This allows all taxpayers, itemizers and non-itemizers alike, to direct gifts from their IRA to charities in a tax efficient manner.
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If you have questions or would like assistance making a donation, you can contact us at firstname.lastname@example.org
This information is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in any examples are for illustrative purposes only. References to tax rates include federal taxes only and are subject to change. State law may further impact your individual results.