Make your giving go further in 2020
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, provides beneficial provisions that directly impact charitable giving for individuals (and corporations) in tax year 2020. Here are a few key provisions of that may affect you and your charitable goals:
Tax Benefits for Charitable Giving
For Itemizers: The AGI limit for cash gifts to charities has increased to 100%
For the 2020 tax year, individuals may deduct cash gifts to public charities, like Boston College, in an amount up to 100% of their adjusted gross income (AGI). This change offers taxpayers who itemize the ability to reduce their 2020 federal income tax by making cash charitable gifts. Ordinarily, deductions would be limited to 60% of AGI.
A taxpayer who makes the 100% of AGI election can carry forward unused qualified cash gift deductions up to 5 years. The carryforward will be subject to the normal 60% of AGI limit, as are cash deductions carried forward from past years.
The benefit does not extend to gifts made to donor advised funds (DAF) or private foundations, or split interest trusts (charitable remainder trusts, charitable lead trusts, or pooled income funds). The legislation is ambiguous regarding cash-funded charitable gift annuities.
For Non-itemizers: now eligible for $300 charitable deduction
A reduction in taxable income is available in 2020 for individuals who do not itemize their deductions. It is an “above-the-line” deduction from taxable income for cash gifts to public charities and is limited to $300 per taxpayer. It is not available for gifts to DAFs or supporting organizations (SO) like private foundations.
For Retirees: Required Minimum Distributions (RMDs) Waived in 2020
If you would normally be required to withdraw funds from your retirement plans, you do not have to take your RMD in 2020. Minimum distributions will not be required from qualified retirement plans, including IRAs, 401(k)s, 403(b)s, and most other defined contribution plans provided by an employer.
This one-year RMD waiver does NOT change the availability of the Qualified Charitable Distribution (QCD), sometimes also referred to as a “charitable IRA rollover.” Those age 70 ½ and older can still make tax-advantaged QCD gifts up to a total of $100,000 per year to Boston College and other charities directly from their IRA.
A QCD remains a tax-savvy way to make a gift using your IRA. Find out more information on making a QCD here.
For Corporations: Charitable Deduction Increased
Limit on cash contributions from corporations increased to 25% in 2020
The taxable income limit that applies to cash contributions made by corporations to charity (again, except to DAFs and SOs) is increased from 10% to 25% for 2020.
The usual 10% limit still applies to other charitable contributions by corporations, and those contributions reduce the 25% limit dollar-for-dollar.
Qualified cash contributions in excess of the 25% limit can be carried forward for up to 5 years under the usual limits.
*As always you should discuss all financial matters with your professional advisor(s) to determine applicability to your individual tax situation.
We’re here to help.
The CARES Act is comprehensive and includes numerous provisions that could benefit you financially. It is suggested that you consult your advisors about these provisions, and contact the Boston College Gift Planning team at 800-304-SHAW or by email at giftplanning@bc.edu if we can help you with any gift-planning opportunities.