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On March 27, the President signed into law the Coronavirus Aid, Relief and Economic Security (CARES) Act to help combat the far-reaching impacts of COVID-19. The bill provides increased tax incentives for charitable giving for both individuals and corporations, signifying an intent to stimulate philanthropy throughout America.
As you look for ways to help those in need, be sure to visit our giving guidance page and understand how the following provisions may impact your charitable contributions in the 2020 tax year.
The adjusted gross income (AGI) limit for cash contributions was increased for individual donors. For cash contributions made in 2020, you can now elect to deduct up to 100 percent of your AGI (increased from 60 percent).
The AGI limit for cash contributions was also increased for corporate donors. Corporations can now deduct up to 25 percent of taxable income (increased from 10 percent).
The CARES Act allows for an additional, “above-the-line” deduction for charitable gifts made in cash of up to $300. If you are not itemizing on your 2020 taxes, you can claim this new deduction.
Both of these new incentives apply only to cash contributions to public charities and do not apply to contributions to supporting organizations or public charities that sponsor donor-advised funds. However, there have been no changes to existing deductions for contributions made into a donor-advised fund like your Giving Account. This means you are still able to deduct up to 60 percent AGI in cash and up to 30 percent AGI in appreciated assets contributed to a donor-advised fund.
Existing carry-over rules still apply, so if your donations in 2020 exceed your AGI deduction limits, you may carry forward excess deductions for up to five subsequent tax years. As always, donors should consult with their tax and legal advisors when considering their charitable giving.
The CARES Act did not change the rules around the QCD, which allows individuals over 70½ years old to donate up to $100,000 in IRA assets directly to charity1 annually, without taking the distribution into taxable income.
However, remember that under the CARES Act an individual can elect to deduct 100 percent of their AGI for cash charitable contributions. This effectively affords individuals over 59½ years old the benefits similar to a QCD; they can take a cash distribution from their IRA, contribute the cash to charity, and may completely offset tax attributable to the distribution by taking a charitable deduction in an amount up to 100 percent of their AGI for the tax year.
If you’re planning a large donation in 2020, this may be a smart strategy as long as you are between the ages of 59½ and 70½ and are not dependent on existing retirement funds.
1 – Sponsoring organizations with donor-advised fund programs are not qualifying charities for QCDs.
The tax information provided is general and educational in nature and should not be construed as legal or tax advice. Fidelity Charitable does not provide legal or tax advice. Content provided relates to taxation at the federal level only. Charitable deductions at the federal level are available only if you itemize deductions. Rules and regulations regarding tax deductions for charitable giving vary at the state level, and laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of the information provided. As a result, Fidelity Charitable cannot guarantee that such information is accurate, complete, or timely. Tax laws and regulations are complex and subject to change, and changes in them may have a material impact on pre- and/or after-tax results. Fidelity Charitable makes no warranties with regard to such information or results obtained by its use. Fidelity Charitable disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Always consult an attorney or tax professional regarding your specific legal or tax situation.
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