Given the significant and long-term impact of the novel coronavirus, the CARES (Coronavirus Aid, Relief, and Economic Security) Act, passed by Congress and signed into law earlier this year, includes immediate relief measures for non-profit organizations. These measures are primarily reflected in changes to deductibility of charitable contributions which could have tax advantageous implications to both individuals and corporations alike.
This is the first time in history that Congress has passed legislation providing for these types of giving incentives in response to a disaster or national emergency. In a year in which we all face so much uncertainty, it is critical to recognize the continued importance of organizations like the Great Meadow Foundation. Great Meadow serves as a constant reminder of why we need to protect scenic beauty and vast open spaces throughout the Virginia Piedmont. Flanked by the Blue Ridge Mountains in the west, the original mission of Great Meadow, to preserve open space in service to the community, rings truer today then ever.
Individual Charitable Deductions
New Deductions Available
An individual taking the standard deduction may deduct up to $300 a year ($600 for a married couple). Due to the enactment of the 2017 Tax Act which resulted in a significant increase in the standard deduction, many individuals did not receive any direct benefits from their charitable deductions in 2019. Qualified contributions must be made during the 2020 calendar year. You must also elect this new benefit on your 2020 income tax return.
The CARES Act also stipulated benefits for those individuals who itemize their deductions. In 2020 individuals who itemize deductions, may elect to deduct charitable contributions up to 100% of adjusted gross income (AGI). A 40% increase from the normal 60%. This is specifically for gifts that go to a public charity. Private foundations no longer qualify. Donor Advised Funds are also not eligible for the increased deduction.
Corporations that itemize may now deduct up to 25% of their taxable income from the previous limit of 10%. This is specifically for gifts that go to a public charity. Private foundations no longer qualify. Donor Advised Funds are also not eligible for the increased deduction.
Individuals turning 70.5 will not have to begin to take required minimum distributions from their requirement accounts in 2020 instead they can wait until 2021. However, you may still direct up to $100,000 in distributions from your retirement accounts tax-free to public charities annually regardless of whether you itemize or take the standard deduction. This is called a qualified charitable distribution.
Since individuals may now deduct up to 100% of their AGI in 2020, any qualified distribution if you are between the ages of 59 ½ and 70 ½ acts similarly to the qualified charitable distribution previously only granted to individuals of required minimum distribution (RMD) age. If you are at least 50 ½ you can take a cash distribution from your IRA and contribute that cash to a charity and completely offset tax attributable to the distribution by taking a charitable deduction in an amount up to 100% of AGI for the 2020 tax year.
When examining your 2020 charitable giving, please consider a gift to the Great Meadow Foundation. Your donations every year help sustain our stewardship of open land and allow you and the larger community to enjoy its splendor and rich equestrian heritage. Any questions regarding these charitable deduction rules changes may be directed to Executive Director, Carrie Hull at firstname.lastname@example.org or (540)253-5000.
Disclosure: The information provided is general and educational in nature and should not be construed as legal or tax advice.