Gift Planning in 2020
How the New CARES Act May Affect Your Plans in 2020
Legislation known as the CARES Act, designed to rescue the economy from the effects of the coronavirus pandemic, was passed by Congress and signed into law by the president on March 27, 2020. Here is a summary of provisions applicable to charitable giving included in the Act, officially named the Coronavirus Aid, Relief, and Economic Security Act.
The most widely known provision of the CARES act is that individuals earning below certain income thresholds will receive cash payments of $1,200 per person and $500 per child. There are several other important provisions that may help you fulfill your charitable giving goals.
New Charitable Deduction for Non-Itemizers
Taxpayers who take the standard deduction rather than itemizing their deductions will be able to claim a charitable deduction of up to $300 for cash donations made in 2020.
Higher Deduction Limits for Individuals and Corporations
Individuals in 2020 will be able to deduct cash gifts to the extent of their entire adjusted gross income, and the deduction limit for corporations has been raised from 10% to 25% of taxable income.
Required Minimum Distributions (RMDs) Waived in 2020
For the year 2020, there will be no mandatory distributions from retirement accounts, thus allowing those accounts to recover. The minimum age for making a tax-free transfer from an IRA to a charity remains at 70½, and the annual limit remains at $100,000. However, since cash gifts are deductible in 2020 to the extent of adjusted gross income, a person could withdraw and then contribute a larger amount—with the deduction offsetting the taxable withdrawal.
Waiver of Penalties When Retirement Funds Are Used for Coronavirus Purposes
If you are under the age of 59½ and withdraw money in 2020 from your retirement plan to cover expenses incurred by you or a family member related to treatment of the coronavirus, the 10% tax penalty will not apply, taxation of the distribution can be spread over three years, and the amount withdrawn can later be added without regard to contribution limits.
Reinstatement of NOL Carrybacks for Businesses
The CARES Act permits net operating losses (NOLs) from the 2018, 2019, and 2020 tax years to be carried back to the previous five tax years (beginning with the earliest year first) and suspends the 80% of taxable income limitation through the 2020 tax year. The NOL carryback can result in an immediate refund of taxes paid in prior years. There are several other provisions to support small and large businesses.
Contact Us and Your Advisors
The CARES Act is several hundred pages long and includes numerous provisions that could benefit you financially. Consult your trusted financial advisors about these provisions and contact us if we can help you with any gift-planning opportunities, including estate planning and charitable gift planning.