CARES Act - Three Big Changes
On March 27, 2020, the House and Senate passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. There are three big changes that came out of the CARES Act that you should be aware of:
- Cash Gifts – Individuals may deduct $300 above-the-line. This charitable deduction enables a taxpayer who is one of the 90% who take the standard deduction to also benefit from his or her charitable gifts. The $300 above-the-line deduction must be gifts of cash by a nonitemizer, and may not be to a donor advised fund or supporting organization.
- 100% Charitable Deduction Limit – The usual deduction limit for cash gifts to public charities is 60% of adjusted gross income (AGI). For 2020, gifts of cash to charity (excluding donor advised funds and supporting organizations) are deductible to 100% of AGI. The gift may be for any charitable purpose and is not limited to gifts for Coronavirus relief.
- Required Minimum Distribution (RMD) Waiver – The RMD is waived for IRA and other qualified retirement plan owners for the year 2020. This provision will permit IRA and other qualified retirement plan owners to retain funds in their IRAs. Because the markets declined substantially after the current RMD was calculated based on the plan value on December 31, 2019, Congress determined that it was beneficial to waive the RMD for 2020. Loyal donors may still wish to use IRA funds to make a qualified charitable distribution (QCD). The QCD is available up to $100,000 for individuals who are over age 70½.
To read more about how the CARES Act can help save 100,000 nonprofits, click here.
By Charles Schultz
President/CEO, Crescendo Interactive, Inc.
April 2, 2020 11:46 AM PT
Does the above-the-line $300 deduction apply per individual taxpayer or per filing capped at $300? Specifically, would a married couple filing jointly be able to deduct $600?
April 2, 2020 3:06 PM PT
The text of the CARES Act, H.R. 748, Section 2204(a)(22) states: "In the case of taxable years beginning in 2020, the amount (not to exceed $300) of qualified charitable contributions made by an eligible individual during the taxable year." Eligible individual is defined as "any individual who does not elect to itemize deductions." Based on the language of the statute, it sounds like this benefit is for an individual, rather than per return. More information will be forthcoming from the Joint Committee on Taxation or the Form 1040 Instructions, which will definitively determine if this is per individual or per return.
April 21, 2020 9:14 AM PT
Is the 100% charitable deduction limit applicable to a gift made to fund a charitable gift annuity? Or does it only apply to an outright gift?
April 21, 2020 10:50 AM PT
Thank you for your questions! The cash gift charitable deduction limit waiver in the CARES Act is specifically for cash gifts to Sec. 170(b)(1)(A) charities (specifically excluding donor advised funds and supporting organizations). It is best for donors to obtain their own counsel on these topics, because most charities do not provide tax or legal advice. Based on our interpretation, which is subject to change if further guidance is provided on the CARES Act, the intent behind the CARES Act was to generate outright cash gifts to charity. The CARES Act does not expressly prohibit split interest gifts, but there is a lack of clarity on split interest gifts permissibility for the cash gift charitable deduction limit waiver. A charitable gift annuity involves a transfer directly to a charity. Based on that, there is a strong argument that a cash gift to a Sec. 170(b)(1)(A) charity should be considered a cash gift and available for the charitable deduction limit waiver under the CARES Act. On the other hand, Charitable trusts are exempt under other sections of the Code (e.g. Sec. 664), rather than exempt under Sec. 170(b)(1)(A). A cash gift to a charitable trust would not be considered a cash gift to a Sec. 170(b)(1)(A) charity. You may want to run this by your counsel as well to determine if they have an different understanding or interpretation.
April 24, 2020 9:03 AM PT
The Joint Committee on Taxation issued guidance on April 23, 2020 (JCX-12R-20) regarding the $300 above-the-line deduction. On page 22, they clarify that the $300 above the line deduction applies to a "tax-filing unit. Thus, for example, married taxpayers who file a joint return and do not elect to itemize deductions are allowed to deduct up to a total of $300 in qualified charitable contributions on the joint return."
April 29, 2020 7:49 AM PT
THOUGHT I believe that the charitable deduction from CGA's Funded with cash meets the CARES Act for the 100% AGI charitable deductionguidelines since the CGA is actually with a public charity. CRUTS and CLTs are separate entities within themselves which creates the challenge for the charitable deduction from cash funded CRUTS and CLTs to meet the guidelines for the 100% AGI charitable deduction when funded with cash.
April 29, 2020 1:25 PM PT
Thank you for your comment!