CARES Act: The effect on charitable giving
As the effects of COVID-19 continue to reverberate across the globe, you may be looking for ways to help. The Coronavirus Aid, Relief, and Economic Security Act includes several key provisions that can impact charitable giving.
Increased Adjusted Gross Income Deduction Limit for 2020
Under the CARES Act, donors who itemize their deductions may deduct cash contributions to public charities up to 100% of their Adjusted Gross Income in 2020. This represents an increase from the 60% AGI limit that ordinarily applies to cash gifts made to public charities. Excess contributions can be carried forward for up to five additional years.
There are some restrictions. For example, this increased 100% AGI limit does not apply to charitable contributions carried forward from a prior tax year or cash gifts made to:
- Private non-operating foundations
- Donor advised funds
- Supporting organizations
- Split-interest giving vehicles (i.e., charitable remainder trusts, charitable lead trusts, pooled income funds
The CARES Act does not change the AGI limit for charitable gifts of non-cash assets or for gifts to donor advised funds. If you wish to make charitable gifts exceeding the respective AGI limits, you might consider “stacking” charitable gifts of cash and non-cash assets.
To do this, you can give long-term, appreciated securities (including gifts to their donor advised funds) in an amount up to 30% of your AGI and also make cash contributions to other qualified public charities equal to the difference, up to 100% of your AGI.
This strategy allows you to give directly to charities now, while also contributing assets to your donor advised funds to be distributed later.
As an example, you can:
- Contribute long-term, appreciated securities to a donor advised fund in an amount up to 30% of your AGI
- Contribute additional cash to their donor advised fund up to another 30% of your AGI
- Then contribute cash equal to another 40% of your AGI to one or more public charities (including FFTC Community Impact Funds, Scholarship Funds or Designated Funds)
Please note: Appreciated, non-publicly traded assets make tax-efficient gifts, but are difficult for small charities to accept. Since 2012 FFTC has accepted more than $240 million in these and other illiquid gifts, transferring proceeds to public charities or charitable funds.
New Charitable Deduction for Non-Itemizers
Taxpayers who do not itemize their deductions can now claim a tax benefit up to $300 for cash gifts made to public charities beginning in 2020. This deduction is not available for cash gifts to private non-operating foundations, donor advised funds, supporting organizations or split-interest vehicles. This new deduction will not expire after 2020.
Our team would be happy to discuss these changes and how they may affect your charitable planning. Contact Kindl Detar at firstname.lastname@example.org or 704.973.4581 for more information.