Update to How the Financial Stimulus Affects Your 2020 Charitable Contributions

On Monday, April 13, 2020 we published an article on the signing of the Coronavirus Aid, Relief, and Economic Security Act, and the tax benefits the act has on charitable donations. Following is a summary and update to the original article.

Among provisions designed to lighten the economic burden of COVID-19, the CARES Act includes important measures to incentivize charitable giving for both individuals and corporations. These measures are intended to galvanize charitable support for the health care nonprofits at the front lines of the COVID-19 pandemic.  

Read on to understand how the CARES Act could impact your charitable giving plans for the 2020 tax year.

Universal Charitable Deduction for Donations

Under current tax law, you must itemize your taxes in order to claim a charitable tax deduction. For those who take the standard deduction, there is no additional deduction for charitable donations.

Now under the CARES Act, any person can claim a charitable deduction—whether itemizing taxes or not—for cash donations to public charities for a total up to $300 when filing taxes for the 2020 calendar year. (This deduction does not apply to contributions to donor-advised funds.)

Suspended Annual Giving Limits

For taxpayers who itemize their returns, the CARES Act allows charitable deductions of up to 100 percent of adjusted gross income on taxes filed for 2020, up from 60 percent. So, for example, a person with an adjusted gross income of $100,000 can make charitable gifts totaling $100,000 in the 2020 calendar year and claim all of it as a deduction on 2020 tax returns.

This annual giving cap increase also extends to corporations, which can now deduct up to 25 percent of gross annual income for charitable deductions (up from 10 percent) and deduct up to 25 percent for food donations (up from 15 percent).

IRA Gifts

The IRA charitable rollover remains available in 2020. Under the CARES Act, the required minimum distributions (RMDs) are waived for 2020. This waiver of RMDs applies to the following groups whether directly impacted by COVID-19 or not:

• Any IRA owner who is 72 or older in 2020

• Any IRA owner who turned 70 ½ in 2019, did not take an RMD in 2019, AND planned to take a delayed RMD by April 1, 2020

• All beneficiaries of inherited IRAs for decedents who died prior to 2020

Additionally, withdrawals from an individual’s IRA in 2020 are no longer deemed to be a RMD. If you have taken a RMD withdrawal in 2020, you may now transfer what was withdrawn back into the IRA within 60 days of withdrawal date.

Donor-Advised Funds

Deduction limitations for charitable gifts to donor-advised funds, private non-operating foundations and supporting organizations were not changed under the CARES Act.

COVID-19 Rapid Response

Your partnership is vital—now more than ever. Our physician-scientists at Barnes-Jewish Hospital and Washington University School of Medicine are collaborating to create solutions to combat COVID-19. Donor investment ensures our rapid response to the most urgent health care needs and priorities. Learn more about BJC HealthCare’s response to COVID-19—and take advantage of tax incentives while keeping this critical work moving at FoundationBarnesJewish.org/covid19.