CARES Act Includes Charitable Giving Incentives
The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, which the President signed into law on March 27, provides more than $2 trillion in relief touching nearly every corner of the U.S. economy.
We want to let you know about a few key provisions of the new CARES Act that may be beneficial to you as you consider supporting our students.
The new law allows all taxpayers to take a charitable deduction of up to $300, even if you do not itemize. A reduction in taxable income is available in 2020 for individuals who do not itemize their deductions. It is an “above-the-line” adjustment to income that will reduce your adjusted gross income (AGI) and thereby reduce taxable income. This adjustment is available for cash gifts to public charities like Southwestern University and is limited to $300 per per tax-filing unit. It is not available for gifts to donor advised funds.
For those who do itemize their deductions, the new law allows for cash contributions to qualified charities such as Southwestern to be deducted up to 100% of your adjusted gross income for the 2020 calendar year. For the 2020 tax year only, an individual may elect to apply a new 100% of adjusted gross income (AGI) limit to cash gifts to public charities. Gifts to donor advised funds or supporting organizations are not eligible for this special election. The 100% limit is reduced dollar-for-dollar by other itemized charitable deductions.
Finally, the new law temporarily suspends the requirements for required minimum distributions (RMD) for the 2020 tax year. Even so, making a qualified charitable distribution (QCD) this year will still allow itemizers and non-itemizers alike to direct up to $100,000 from their IRA to charities in a tax efficient manner. Many of our alumni and friends use some or all of their required minimum distribution to make a gift from their IRA. If you are 70½ or older, you can still make a gift from your IRA or name us as a beneficiary.
We encourage you to consult your tax professional to learn more about how these changes to the law may apply to your financial situation.