The CARES Act

The CARES Act

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion economic stimulus package. Three important changes may affect your charitable giving plans*:

1. Required minimum distributions suspended for 2020

  • CARES Act waives the requirement to take required minimum distributions in 2020, helping retirees who have seen their portfolio value decrease.
  • Qualified charitable distributions are still available to IRA owners 70 ½ and older.
  • If the donor reached the age of 70 ½ on or before December 31, 2019, he can use his gift to satisfy all or part of the required minimum distribution (RMD) for the year. If the donor turned 70 ½ on or after January 1, 2020, he can use his gift to satisfy all or part of the RMD starting at the age of 72.

2. Universal charitable deduction created

  • CARES Act created a new $300 ($600 for a married couple) above-the-line deduction in annual charitable contributions for taxpayers who take the standard deduction.
  • The deduction is an “above-the-line” adjustment to income that will reduce a donor’s adjusted gross income (AGI), reducing taxable income.
  • Please note: Gifts to donor advised funds do not qualify for this deduction.

3. Cap lifted on cash contributions for those who itemize

  • CARES Act lifts the charitable deduction cap for cash contributions made to a public charity.
  • For those who itemize their taxes, a greater amount of the charitable contribution can be deducted, and the annual limit on cash gifts is 100% of their AGI for 2020 (in comparison to 60%).
  • Corporations can deduct up to 25% of taxable income; up from the previous limit of 10%.
  • Only contributions made in 2020 qualify.
  • If a contribution exceeds a donor’s AGI, the excess can be carried over to the subsequent year, but it will be subject to the percentage limitations in the carryover years.
  • Please note: Gifts to donor advised funds do not qualify for this deduction.

For more information, please contact: Jordan.Castillo@BSWHealth.org

*Please consult your tax or legal services provider. Baylor Scott & White Central Texas Foundation does not provide legal or tax advice.

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