As an eventful 2020 winds to a close and thoughts turn to year-end fundraising, it’s worth revisiting the Coronavirus Aid, Relief, and Economic Security (CARES) Act—the $2 trillion economic stimulus package introduced last March. The act contains numerous provisions related to philanthropic giving, and fundraisers should include reminders in year-end appeals.
Here are the highlights:
Impact on Charitable Gifts
The CARES Act created a temporary above-the-line charitable tax deduction for cash donations of $300 per individual or joint filers. This deduction is available only to individuals who do not itemize their returns and claim the standard deduction ($12,400 for singles, $18,650 for head of household, $24,800 for married filing jointly). This means you can now deduct your gift even if you take the standard deduction.
For those who itemize deductions, the cap on annual giving rose from 60 percent of adjusted gross income to 100 percent. This provision is very favorable to those donors who wish to make large cash contributions in 2020, the deductibility of which might otherwise have been curbed due to the percentage limitations. Note that gifts made to Donor Advised Funds do not qualify for the increased deduction.
Impact on Retirement Accounts
The law impacts some owners of Individual Retirement Accounts (IRAs) by providing a temporary waiver of Required Minimum Distributions (RMDs). This waiver will allow IRA owners age 72 or older to keep funds in their IRAs and other qualified retirement plans. For individuals who had to take an RMD for tax year 2019 before the April 2020 deadline, that requirement has been waived for the year.
Because of the unlimited charitable deduction allowed for cash gifts to charity this year, a taxpayer can in effect make a tax-free rollover of any amount to charity in 2020 by making a taxable withdrawal from an IRA that will be included in income, giving the cash to a public charity and offsetting the income completely by the charitable deduction, regardless of the amount.
As you segment your database lists and craft tailored messages, consider who among your donors and prospects might benefit most from these provisions. Perhaps include a bullet list on a card insert, and be sure to note them on your giving website and in conversation.