Cares Act Charitable Giving Incentives
The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, signed into law on March 27, 2020, includes several provisions that may affect charitable giving this year.
Charitable deduction for taxpayers who do not itemize. Beginning in 2020, individuals can deduct $300 in charitable contributions from their gross income even if they do not itemize their deductions on their tax return. Joint filers who are not itemizing will be allowed to take an above-the-line deduction of up to $600 in cash contributions to charity. Donations must be made in cash or cash equivalents (check or credit card) to Hollins. Gifts of appreciated securities and gifts to a donor advised fund or supporting organization do not qualify. Although the permissible amount is modest, it is a new benefit available to many of our donors. No cap on charitable deductions for taxpayers who do itemize. Donors who itemize their deductions can usually deduct cash or cash equivalent contributions up to 60% of their adjusted gross income. For 2021, that cap is lifted, and donors contributing cash or cash equivalents to charitable organizations may deduct up to 100% of their income, a significant tax savings for anyone able to contribute larger amounts. Again, this is only for gifts of cash or cash equivalents, and only for gifts made directly to Hollins (not to donor-advised funds or supporting organizations).
No required minimum distributions, but qualified charitable distributions still possible. The CARES Act eliminates required minimum distributions (RMDs) from many retirement plans in 2021. Some donors have been using their RMDs for tax-advantaged charitable gifts by making a qualified charitable distribution (QCD) directly to charitable organizations. Under the CARES Act it is still possible for donors who are 70½ or over to contribute up to $100,000 directly to a charitable organization without paying tax on the distribution.
The CARES Act is a complex law and donors should always consult with their own professional advisors before making a gift.
The 2021 Cares Act provision expires December 31, 2021.