The CARES Act creates two incentives for 2020 individual giving:
- One allows an itemized charitable deduction for up to 100% of adjusted gross income for cash gifts paid in 2020 to qualified charities. The donor must elect this provision. The IRS will instruct taxpayers how to make the election.
- The other allows a $300 above-the-line (non-itemized) charitable deduction for cash gifts paid in 2020 to qualified charities.
Which charities qualify?
Public charities other than donor advised funds and supporting organizations.
Colleges, hospitals and religious organizations qualify, for example.
What are cash gifts?
Cash gifts include money, checks paid in due course and credit card donations.
But note, there are other forms of cash giving, such as paying a charity’s debt (considered a cash gift to charity).
Unreimbursed volunteer expenses are another example.
Credit card gifts—a date-of-gift problem
A credit card donation is not deemed paid to charity until the charge is posted to the donor’s account as shown on the donor’s credit card statement.
This rule can cause 2020 year-end problems for charities and donors.
What about gift annuities and charitable remainder trusts?
If an individual establishes a cash-funded gift annuity in 2020, does the itemized charitable deduction for creating the gift annuity come within the CARES Act?
Arguably YES, because the cash is paid to charity.
What about a cash-funded charitable remainder trust (CRT)? The CARES Act on its face doesn’t apply because the cash isn’t paid to a charity … it’s paid to the CRT.
What about qualifired charitable distributions (QCDs) from IRAs?
The CARES Act does not change the QCD rules.
The CARES Act, however, does eliminate the requirement of a required minimum distribution (RMD) for 2020. And, remember, the SECURE Act increased the RMD age from 70 ½ to 72 years for individuals who attain 70 ½ years after 2019.
Where do the cash-giving opportunities lie?
I expect most of the 2020 reported cash gifts will be of the $300 non-itemized type.
Large 2020 cash gifts, I believe, are most likely to come from individuals who receive big chunks of cash from selling appreciated assets and face 2020 gain.
Cash QCDs, which have been a good way to give in prior years, continue to be a good way to give.
By Jon Tidd
CARES Act Communication
In response to the health and financial crisis caused by the coronavirus global pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act has been enacted. The law presents a plan for the government to aid Americans and businesses during these uncertain times. Among the charitable giving provisions, it includes a temporary, partial “above the line” charitable deduction for cash gifts (up to $300) in 2020 to encourage gifts by taxpayers who are unable to itemize under current tax law. The legislation also modifies the limitation on qualified charitable gifts of cash to 100% of AGI for itemizers in 2020.
To help you communicate these provisions with your donors, Sharpe Group has created a new brochure, The CARES Act: Good News When We Need It Most, which outlines all provisions affecting charitable giving in an easily digestible format. This brochure makes an ideal and welcome message to all current and prospective donors, especially in a targeted soft appeal to your gift planning prospects. It can also serve to educate your board, volunteers and staff.
Click here to learn more.
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