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CARES Act & Charitable Giving Incentives

The CARES Act and Charitable Giving Incentives

The Coronavirus Aid-Relief and Economic Security Act (“CARES”) enacted on March 27, 2020 contained significant provisions related to charitable deductions, providing many individual and corporate donors with greater flexibility in making gifts to non-profit organizations.

New Deduction for Qualified Charitable Donations

Individuals who do not itemize their deductions will be able to claim a $300 ($600 for married filers) above-the- line deduction for cash contributions made to qualified charitable organizations in 2020. This deduction is available to taxpayers who claim the standard deduction, which significantly broadens the pool of individual taxpayers who can receive a tax benefit for charitable contributions.

AGI Limit for Charitable Deductions Increased

Individuals who itemize their deductions can now deduct cash contributions to qualified charitable organizations of up to 100% of their adjusted gross income (AGI) for the 2020 tax year, effectively reducing taxable income to zero. These deductions were previously limited to 60% of their AGI. To the extent a taxpayer’s contributions in 2020 exceed 100% of their AGI, that excess will carry forward for up to five additional tax years.

Taxable Income Limit for Corporate Charitable Deductions Increased

C Corporations can now deduct cash contributions to qualified charitable organizations of up to 25% of the corporation’s taxable income for the 2020 tax year. These deductions were previously limited to 10%.

IRA RMD Waived/Direct RMD Transfer Still Allowed

The requirement for taxpayers to receive a Required Minimum Distribution (“RMD”) an from their IRA or other qualified retirement plan is waived in 2020. However, if a taxpayer is 70 ½ or older, they still have the option to make a charitable gift of up to $100,000 via an IRA withdrawal if the cash distribution is sent directly to a qualified nonprofit. This eliminates the contribution from ever becoming taxable income and, despite the waiver of RMD’s in 2020, is still a very effective tool for contributing to non-profit organizations.Contributions to new or existing donor-advised funds do not qualify for either the above-the-line $300 deduction or the 100% of AGI deduction.

To receive more information or to learn how to make a tax-deductible contribution to MNCEO, please contact Sue Crockett at scrockett@mnceo.org

To download the Cares Act document click here