New Tax Law Raises Charitable Gift Giving Incentives
The CARES Act, designed to help the nation recover from the pandemic, has five important implications for charitable giving:
1. New Charitable Deduction for Non-Itemizers: Taxpayers who take the standard deduction can nevertheless claim a charitable deduction of up to $300 for cash donations in 2020.
2. Higher Deduction Limits: Individuals will be able to deduct cash gifts in 2020 to the extent of their entire adjusted gross income rather than a cap of 60%.
3. Increased Deduction Limits for Corporations: The contribution limit for corporations has been raised to 25% for cash contributions this year.
4. Required Minimum Distributions Waived: For the year 2020, there will be no mandatory distributions from retirement accounts, thus allowing those accounts to recover. Once they do. recover, retirement funds are a tax-wise giving strategy.
5. Waiver of Penalties When Retirement Funds Are Used for Coronavirus Purposes: If you are under the age of 59½ and withdraw money from your retirement plan to cover expenses incurred by you or a family member related to the treatment of the coronavirus, the 10% tax penalty will not apply. In the future, you may consider a retirement fund gift.