The Coronavirus Aid, Relief, and Economic Security (CARES) Act
Passed in late March 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act provided over $2 trillion in economic relief to taxpayers, businesses, and nonprofits. The Act also contained a number of changes to tax policy related to charitable gifts of cash to public charities like the Purchase College Foundation and Charitable Entities or the Neuburger Museum of Art:
Non-Itemizers Now Eligible for New $300 Charitable Deduction
Taxpayers who take the standard deduction (non-itemizers) typically do not qualify for itemized charitable deductions. For these non-itemizing individuals in 2020, a $300 above-the-line adjustment will be made to reduce the donor’s adjusted gross income and thereby reduce taxable income.
Increase in Adjusted Gross Income Limit from 60% to 100%
The usual deduction limit for cash gifts by individuals to public charities is 60% of adjusted gross income (AGI). In 2020, gifts of cash are deductible to 100% of AGI.
Increase in Corporate Charitable Deduction from 10% to 25%
The taxable income limit that applies to cash contributions by corporations has been increased from 10% to 25% for 2020.
Waiver of Required Minimum Distribution (RMD) for Retirement Plans
Most taxpayers will not have a RMD from their retirement plans in 2020, including IRAs, 401(k)s, 403(b)s and most other defined contribution plans maintained by an employer for individuals. However, making a Qualified Charitable Deduction this year will still enable both itemizers and non-itemizers to contribute up to $100,000 from their IRA to the Purchase College Foundation or the Friends of the Neuberger Museum of Art in a tax-efficient manner or name the Foundation or Friends as a beneficiary.