As you start your end of year tax planning, the Annie Clarkson Society reminds you that the CARES (Coronavirus Aid, Relief, and Economic Security) Act signed into law this past spring is designed to help you, businesses and nonprofits facing economic hardship during the coronavirus pandemic.
There are many provisions designed to help you, but here are a few key provisions of the CARES Act that may affect you and your charitable goals:
New Tax Incentives
The CARES Act allows taxpayers to take a charitable deduction of up to $300 ($600 for married couples) for those who take the standard deduction. In order to encourage charitable contributions in 2020 (for any charitable purpose, not just contributions to charities related to the COVID-19 crisis) the CARES Act increases the maximum 60% of AGI charitable contribution limit to 100% of AGI limit for 2020. This means that you can get a charitable contribution deduction for the full amount of your Adjusted Gross Income. Charitable contributions in excess of this amount can be carried forward for five years subject to the 60% of AGI limit in those years. The higher 100% of AGI limit applies to cash contributions made directly to charitable organizations, not to contributions to donor advised funds, supporting organizations or private foundations.
For those who do itemize their deductions, the new law allows for cash contributions to qualified charities such as Clarkson University to be deducted up to 100% of your adjusted gross income for the 2020 calendar year.
Required Minimum Distributions Suspended
The new law temporarily suspends the requirements for required minimum distributions (RMD) for the 2020 tax year. This probably comes as a relief to many of you who would have had to withdraw from your retirement accounts. Many of our donors use their RMD to make a gift from their IRA, or just recently turned 72 and had to for the first time. Despite the RMD suspension, remember that if you are 70½ or older, you can still make a gift from your IRA or name Clarkson University as a beneficiary.
Why a Gift From Your IRA Still May Benefit You and Clarkson
- You pay no income taxes on the gift. The transfer generates neither taxable income nor a tax deduction, so you benefit even if you do not itemize your deductions.
- Since the gift doesn’t count as income, it can reduce your annual income level. This may help lower your Medicare premiums and decrease the amount of Social Security that is subject to tax.
- Your gift will be put to use today, allowing you to see the difference your donation is making.