The CARES Act
CARES Act Offers Enhanced Benefits for Charitable Giving
On March 27, 2020, President Trump signed the Coronavirus, Aid, Relief, and Economic Security (CARES) Act. The historic $2.2 Trillion federal package is designed to provide health care and financial security to Americans during the Coronavirus pandemic.
The CARES Act includes significant statutory changes to federal law that will impact charitable giving, philanthropic planning, and estate planning. In many ways, the CARES Act enhances the tax benefits of giving to charities like Bucknell. Notably, nearly all of the provisions related to tax planning and charitable giving are only applicable for Tax Year 2020.
Important Changes That May Impact Charitable Giving
Charitable Deduction for Non-Itemizers: For 2020, taxpayers who take the standard deduction can reduce adjusted gross income (AGI) by making cash gifts to public charities like Bucknell. This deduction is limited to $300. Gifts to donor-advised funds (DAFs) or supporting organizations (SOs) are not eligible and taxpayers cannot carry forward cash deductions from prior years.
Temporary Increase in Deductibility of Cash Gifts for Itemizers: For 2020, taxpayers may elect to apply a 100% of adjusted gross income (AGI) limit to cash gifts to public charities like Bucknell. Ordinarily, deductions would be limited to 60% of AGI. This change offers taxpayers who itemize the ability to reduce or eliminate their 2020 federal income tax by making cash charitable gifts. Gifts to donor-advised funds (DAFs) or supporting organizations (SOs) are not eligible for this special election.
A taxpayer who makes the 100% of AGI election can carry forward unused qualified cash gift deductions up to 5 years. The carryforward will be subject to the normal 60% of AGI limit, as are cash deductions carried forward from past years.
In some instances, the 100% election may not be the tax-wise choice. Because federal tax rates are progressive, it may not always be advisable to deduct 100% of your cash gifts in 2020. Taxpayers should consult their tax advisers to determine whether the 100% election makes sense for them.
Temporary Increase in Deductibility of Cash Gifts for Corporations: For 2020, corporations can deduct up to 25% of taxable income for cash gifts to public charities like Bucknell. This represents an increase from the previous limit of 10%. Gifts to donor-advised funds (DAFs) or supporting organizations (SOs) are not eligible. Qualified cash contributions in excess of the 25% limit can be carried forward for up to 5 years under the usual limits.
Temporary Increase of Limit on Contributions of Food Inventory: For 2020, the limitation on deductions for gifts of food inventory by any trade or business is increased from 15% to 25%.
Other Changes That May Impact Your Financial and Estate Planning
(Note: This is a partial list, please consult your professional advisers.)
Temporary Elimination of Required Minimum Distributions (RMDs): For 2020, minimum distributions will not be required from retirement plans, including IRAs, 401(k)s, 403(b)s, and most other defined contribution plans provided by an employer.
PLEASE NOTE: This one-year RMD waiver does NOT change the availability of the Qualified Charitable Distribution (QCD), sometimes also referred to as a “charitable IRA rollover.” Those age 70 ½ and older can still make tax-advantaged QCD gifts up to a total of $100,000 per year to Bucknell and other charities directly from their IRA. A QCD remains a tax-savvy way to make a gift to Bucknell using your IRA. Find out more information on making a QCD here.
Delayed Tax Filings and Payments: Individuals with a 2019 federal tax return and payment previously due by April 15, 2020 are now due by July 15, 2020. There is no limit on the amount of payments that can be postponed.
Rebate Payments: Individuals will receive rebates of up to $1,200 ($2,400 for joint filers). Each dependent claimed (that is 17 or under) would increase the amount by $500. Eligibility is based on 2018 adjusted gross income. The amount begins to phase down at $75,000 of income ($150,000 for joint filers, $112,500 for heads of households), down to zero at $99,000 of income ($198,000 for joint filers) for those with no dependents.
Important Notice: Individual tax and financial circumstances will vary. Tax rules are complex and subject to change. The information on this website is not intended as legal, financial, or tax advice. For such advice, please consult a professionally qualified attorney, financial advisor, or tax advisor.
The CARES Act provides additional tax incentives to encourage charitable giving. You have important priorities for your family and loved ones, and we know that their health and financial well-being comes first. When you are ready, we will be here to help you shape a charitable gift plan that suits your needs and allows you to keep supporting Bucknell’s mission.