The new CARES (Coronavirus Aid, Relief, and Economic Security) Act is designed to help individuals, businesses, and nonprofits facing economic hardship during the coronavirus pandemic.
Here are a few key provisions of the CARES Act that may affect you and your charitable goals:
A new deduction for charitable donors who do not itemize when filing their tax returns. If you do not itemize but make a cash gift to charity, you will be allowed to take a special tax deduction in 2020, up to $300 (per taxpayer unit) to reduce your tax liability.
For those who do itemize their deductions, the new law allows for cash contributions to qualified charities (such as From Here to Haiti) to be deducted up to 100% of your adjusted gross income for the 2020 calendar year. Previously the deduction was capped at 60% of annual income.
The new law temporarily suspends the requirements for required minimum distributions (RMDs) from IRA for the 2020 tax year. For those over the age of 70 1/2 and in the habit of using your RMD for charitable contributions, it may still be a good idea to make your gift from your IRA because you pay no income taxes on the gift, and since the gift does not count as income, it can help you reduce your annual income level. This in turn may help lower your Medicare premiums and decrease the amount of Social Security that is subject to tax.
As always, consult your tax advisor before taking any action.
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