The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) stimulus plan includes charitable giving incentives. The following information highlights the key parts of the plan, but it is not intended to provide legal advice. For such advice, please consult an attorney or tax advisor.
Taxpayers who do not itemize their deductions can take a one-time deduction of up to $300 for gifts made to charitable organizations. The provision is intended only for the year 2020; however, in the text of the bill, it states taxable years “beginning in 2020 …” and does not include a sunset date, thus it conceivably could extend beyond 2020. The deduction is ONLY for gifts of cash made in calendar year 2020 and does not cover other types of gifts or contributions made to donor-advised funds or private foundations.
The 60 percent adjusted gross income limitation for individuals’ charitable contributions is suspended for the year 2020. In a typical year, individuals can only take a charitable deduction of up to 60 percent of their adjusted gross income, no matter how much they give. For 2020, there is no limit, making cash contributions fully deductible.
The cap on how much corporations may deduct for charitable gifts is increased from 10 percent of taxable income to 25 percent. In addition, the limitation on deductions for food donations by corporations increases from 15 percent to 25 percent in 2020.
For 2020, the required minimum distributions from retirement plans, such as pensions and 457 plans, is waived. Any minimum distributions from retirements plans that would have been required in 2020 can be delayed until 2021. This change reduces the incentive for donors to make gifts from their individual retirement account (IRA)—the IRA Rollover Provision