Changes in Giving for the 2020 Tax Year Only
To spur giving during this time, the CARES Act created some incentives for giving in 2020.
There is no limit on the amount donors can contribute if you itemize your taxes. Previously, you could donate up to 60% of your Adjusted Gross Income (AGI). Under this Act, 100% of your charitable contributions can be deducted. For example, if you donate $200,000 and your taxable income is $200,000, you would avoid paying any income tax in 2020. This change only applies to cash gifts made to qualified charitable organizations and does not apply to contributions to private foundations, donor advised funds or gift accounts.
Another change that was implemented was to allow individuals who take the standard deduction and do not itemize the ability to deduct up to $300 for charitable contributions for the 2020 tax year. Again, the donations do not apply to private foundations, donor advised funds or gift accounts.
Even though Required Minimum Distributions (RMDs) are waived for 2020, you can still contribute up to $100,000 of your IRA to charity as a Qualified Charitable Distribution (QCD).
Also, you don’t need to be 72 – the new RMD age, to take advantage of the QCD. The SECURE Act, signed into law in 2019, allows individuals who are age 70 ½ the ability to make a QCD.
Recall the advantage for the QCD because the amount donated to qualified charities satisfy your RMD requirements and lowers your AGI. For this year, that is not the case, as they are waived. However, a QCD in 2020 reduces future RMD by lowering your overall IRA balance.
As with all tax decisions, you should meet with your tax advisors to determine the best charitable giving strategy for your situation. Contact Jessica Fortkamp, Donor Relations Director, to discuss giving and charitable funds at firstname.lastname@example.org or call 937- 497-7800.