Financial Planning: Philanthropic Giving is Even More Valuable in 2020 Using CARES Act

Up-and-down High Street, on the side streets of Cross and Cannon, and dotting the towns and by-ways of our county, are the businesses and nonprofits that build our community and make Kent County this special and vital place.  In 2020, Congress passed the CARES Act, and it was signed into law on Friday, March 27th.  Many know about the PPP loan program that was part of the Act to help businesses struggling through the global pandemic, but many do not know about the opportunities for giving to nonprofits that the CARES Act created using special tax treatments for donations.

Thanks to the CARES Act there are special tax benefits for cash donations made in 2020:

Many people no longer itemize their tax returns.  To help make giving valuable to all tax filers, the CARES Act, allows for an “above-the-line” deduction, which means tax payers not itemizing can take a deduction for donations of cash made to non-profits up to $300.  

For taxpayers who itemize, the CARES Act provides an extraordinary opportunity for charitable giving.  Up to 100% of a taxpayer’s Adjusted Gross Income can be deducted for the equivalent amount made as a cash donation.  

Corporations can also benefit from special tax opportunities for donations of cash to non-profit organizations.  A corporation can deduct up to 25% of taxable income for equivalent cash donations.  

For many years, taxpayers have received special tax deductions for other types of donations that are still very valuable and not to be overlooked.

Even though the CARES Act has eliminated, only for the year 2020, the Required Minimum Distribution that must be taken from retirement accounts after attaining 70.5 (as of 2020 the age has been raised to 72) – a Qualified Charitable Distribution made from an IRA can still be completed, if the donor has attained the necessary age.  Some distributions from IRAs made payable to charities are not counted as ordinary income and there is not a taxable event; it is very important with these types of distributions to speak with your financial advisor and tax preparer to make sure you are eligible, and the process is handled correctly.  The donor must meet an age requirement and the donation must be paid from the IRA to the charity.

Some individuals generously donate highly appreciated stock to non-profits.  For those with stocks that have risen in value, donors can give the actual stock to a non-profit without selling the shares so there is not a taxable juncture.  Again, this type of donation should be handled by your financial advisor and reviewed by your tax professional.

Taxes are complicated and require special care.  When considering any of these special CARES Act opportunities, it is most important that you consult with your tax professional and financial advisor.