We've created this guide to help donors understand the impact of these charitable giving incentives for 2020.
In March 2020, the United States Congress passed the CARES Act (Coronavirus Aid, Relief and Economic Security Act), a $2.2 trillion stimulus plan that supports Americans through the Coronavirus pandemic.
Recognizing the importance that charitable giving plays in supporting the complex needs of the United States and the world, the Act also contains a number of charitable giving incentives for donors.
Understanding that these provisions are temporary (currently available only in 2020), the University at Buffalo has prepared the following guide to help donors understand the impact of these charitable giving incentives for 2020.
The provisions of the Act fall into four key categories:
The CARES Act created a universal deduction for charitable contributions of up to $300.
This deduction will apply to all taxpayers, including those who do not itemize (i.e., those who claim the standard deduction) and will enable them to deduct $300 for gifts of cash made to charitable organizations, such as UB.
Example: Joe and Melanie, who typically take the standard deduction for couples on their tax return (e.g., $24,800), are now also be able to benefit from an additional tax break (up to $300 for cash gifts) in addition to the standard deduction in 2020.
In a typical year, individuals can take a charitable deduction of up to only 60 percent of their adjusted gross income (AGI), no matter how much they give. The CARES Act suspends the existing 60 percent AGI limitation and individuals can now deduct donations up to 100 percent of their 2020 AGI. This change applies only to cash contributions.
Example: Lenore has an AGI of $100,000 and made a $100,000 cash gift to UB.
If Lenore made this gift in 2019, the most she could have taken as a charitable deduction on her 2019 tax return is $60,000 (60 percent of AGI). However, because of the CARES Act, in 2020, Lenore can deduct the full $100,000 gift on her 2020 tax return. Thus, assuming no other unique factors, Lenore would fully offset her federal income tax obligations for 2020 and potentially owe no federal income tax for 2020. Note: In both scenarios, any unused deduction is available to be carried over to offset Lenore’s income tax obligations (subject to the 60 percent AGI limit) for five additional years.
The new law temporarily suspends the required minimum distribution (RMD) rules for the 2020 tax year. Thus, generally no one is required to take an RMD from his or her IRA or other retirement account for 2020. Nonetheless, making a charitable donation through a qualified charitable distribution (QCD), also known as an IRA Charitable Rollover, continues to be a smart and tax-efficient way to give for many donors.
For more detailed information on making a gift to UB using retirement assets, the impact of the CARES Act as well as other options for giving, visit https://buffalo.planmylegacy.org/cares-act.
The CARES Act increases the current taxable income limit on cash contributions made by corporations from 10 percent to 25 percent for 2020.
The University at Buffalo Office of Planned Giving is a resource for any donors or alumni to UB who have questions about charitable giving. While not a substitute for legal or professional tax advice, our staff welcomes inquiries from UB alumni and friends about how to take advantage of charitable giving incentives, including the CARES Act, for personal financial planning.
For more information, please contact Wendy Irving, Esq. at firstname.lastname@example.org or (877) 825-3422.