Giving

2020 CARES ACT

 

WHAT IS THE CARES ACT AND WHY DOES IT IMPACT MY PHILIANTHROPIC GIVING?

 

The CARES (Coronavirus Aid, Relief, and Economic Security) Act was passed by Congress and signed into law by the President on March 27, 2020. It is a $2 trillion economic stimulus package designed to help you, businesses, and nonprofits facing economic hardship during the pandemic.

 

WHAT DO I NEED TO KNOW AND HOW DOES THE CARES ACT WORK:

  • New Deduction Available: For taxpayers who take the standard deduction, they can take up to $300 per taxpayer ($600 for a married couple) 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. A donation to a donor advised fund (DAF) does not qualify for this new deduction.  $300 may not seem like a lot, but what if our entire Whitefield community gave “just” $300? This support would have a huge impact on the ministry of Whitefield!
    • How does it work? The bill makes a new deduction available for up to $300 per taxpayer ($600 for a married couple) in annual charitable contributions. It is calculated by subtracting the amount of the donation from your gross income. It is an “above the line” adjustment to income that will reduce your AGI, and thereby reduce taxable income. To qualify, you would have to give a donation to a qualified charity, like Whitefield. If you have already made your donation since Jan. 1, that contribution counts toward the $300 cap.
  • 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 Whitefield Academy. The higher deduction does not apply to donations made directly to a DAF. 
    • How does it work? Also, as part of the bill, individuals and corporations that itemize can deduct much greater amounts of their contributions. Individuals can elect to deduct cash contributions, up to 100% of their 2020 adjusted gross income, on itemized 2020 tax returns. This is up from the previous limit of 60%. Corporations may deduct up to 25% of taxable income, up from the previous limit of 10%. The new deduction is only for cash gifts that go to a public charity. If you give cash to, say, your private foundation, the old deduction rules apply. And while the organizations that manage DAF’s are public charities, you do not get the higher deduction for donating cash to your DAF. These new limits do not apply to gifts of appreciated stock.

For more information, please contact Lauren Race, Director of Development, or consult your tax advisor.

 

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.