The CARES Act
The CARES (Coronavirus Aid, Relief, and Economic Security) Act was created to help individuals, businesses, and nonprofits facing economic hardship during the coronavirus pandemic. While many of your giving options and opportunities have not changed, there are a few key points to note:
- New Charitable Deduction Limits – You may now deduct gifts of cash to offset as much as 100% of your income.
For the 2020 tax year only, you may deduct cash contributions to Franklin & Marshall College and most other public charities to offset up to 100% of your income. Ordinarily, the income tax charitable deduction for cash gifts is limited to 60% of your income. This 100% limit allows especially generous donors to reduce their 2020 federal income tax to zero. If your assets are substantial enough that you can give more than your income this year, you won’t lose the deduction for the excess amount. You can use it up to the next five years, as has always been the case.
The new deduction is only for cash gifts that go to a public charity. If you give cash to, say, your donor-advised fund, the old deduction rules apply. These new limits also do not apply to gifts of appreciated stock.
Because federal income tax rates are progressive, it is not a given that it will be to your advantage to deduct 100% of your cash contributions in 2020. Check with your financial or other advisors to determine whether the 100% deduction makes sense for your specific circumstances.
- New Deduction Available – If you don’t itemize, you may reduce your taxable income by $300 for your charitable contributions in 2020.
If you do not itemize your deductions in 2020, you can still reduce your taxable income by up to $300 for contributions of cash to public charities using an “above the line” adjustment to reduce your taxable income.
- Temporary Waiver – For 2020 only, the Required Minimum Distribution (RMD) has been waived.
This means that anyone with a traditional IRA does not have to remove funds from their IRA this year. The CARES Act did not change the rules around the qualified charitable distribution (QCD), which allows those 70½ or older to donate up to $100,000 directly from their IRA without counting the distribution as taxable income. While the benefit of using a QCD to satisfy your required minimum distribution has been waived for 2020, QCDs remain a tax advantageous gift, even if you don’t choose to itemize your deductions. If you want to give from your IRA, our online tool makes it easy.
The CARES Act, which was necessary to address the far-reaching effects of the COVID-19 pandemic, 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 helping with our important work.
Please contact Mary Ann M. Cooke, J.D., ’90 at MCOOKE@FANDM.EDU or call (717) 358-4821 to learn about the many ways you can support Franklin & Marshall College.