CARES Act Impact on Charitable Giving

As business leaders, you all have been working to find the fit for your business in the CARES Act and other programs. It's been important work and discussions in C3 Forums have been helpful.

The CARES Act not only provided a stimulus package for business but also for charitable giving to non-profit organizations, like C3 Leaders. We have put together a summary of the current opportunities provided by the CARES Act.

Cash contributions could be eligible for increased tax deductions if made to governmental units, private operating foundations, conduit private foundations, and most public charities, including churches.  These are also known as qualified contributions.

The fact that U.S. Congress included, and President Trump signed, an expanded charitable giving incentive, is a critical acknowledgement of the important work done by non-profit organizations. This is the first time Congress has passed this type of giving incentive in response to a disaster or national emergency.

New Deduction Available

Applicable To:  Those who take a standard deduction.

Today, many tax payers take the standard deduction. If that is you, you can take an "above the line" adjustment to your income through charitable giving up to $300 for qualified contributions as an offset to taxable income.

We are reading conflicting definitions of this deduction.  At this point, our strongest resources say that the $300 deduction is per tax-filing unit. Thus, the deduction is limited to $300, even for taxpayers filing as married filing jointly.

This new policy provides a reduction in the donor’s adjusted gross income (AGI), and thereby reduces taxable income. You get to take $300 right off the top. A donation to a donor advised fund (DAF) does not qualify for this new deduction.

Every person who claims the standard deduction should be taking advantage of this opportunity as it is a reduction to taxable income. To qualify, you would have to give a donation to a qualified charity, like C3 Leaders. If you have already made your donation since January 1, that contribution counts toward the $300 cap.

New Charitable Deduction Limit

Applicable To:  Individuals and C Corps who Itemize

Individuals who itemize their deductions will not have an adjusted gross income (AGI) limitation for qualified contributions during 2020.  This is a major change.

Individuals can elect to deduct donations up to 100% of their 2020 AGI. The deduction is capped at the individual’s charitable base, and the excess contributions may be carried forward to up to five years. This is an increase from 60% previously.

Corporations benefit from an increased deduction of 25% of taxable income for qualified contributions.  This is up from the previous limit of 10%.

 

The new deduction is for gifts that go to a public charity. This is cash gift, these new limits do not apply to gifts of appreciated stock. Old deduction rules still apply for gifts to private foundations and the the higher deduction does not apply to donations directly to a DAF.

If your assets are substantial enough that you can give more than your income this year, you won’t lose the deduction for the excess amount. You can use it next year, as has always been the case.

RMD Waived for Applicable Donors

Applicable to:  Those with traditional, SEP or SIMPLE IRAs.

Required minimum distributions (RMD) that would have had to start in 2020 do not have to start until 2021. This includes distributions from defined benefit pension plans and 457 plans. RMD for individuals over age 70 ½ are suspended until 2021.

This is an attractive way for donors to make a significant charitable gift directly from their IRA to a charity through a qualified charitable contribution (QCD) while avoiding taxable income.

This change may dampen the incentive for a donor to make a QCD from their IRA in 2020. Even so, making a QCD this year will still allow itemizers and non-itemizers alike to direct up to $100,000 from their IRA to charities in a tax efficient manner.

Donors directing a QCD to charity this year (up to $100,000 per individual) will still reduce their taxable IRA balance. This allows all taxpayers, itemizers and non-itemizers alike, to direct gifts from their IRA to charities in a tax efficient manner.

At C3 Leaders, we are at the tip of the economic spear. It is a spear that will pierce longer and more severely then the health crisis. God has us here now to serve business leaders and marketplace influencers. They have a tremendous burden to care for their employees, customers and businesses. Through our C3 Forums and top-notch training, we are reminding them to trust Jesus. We are trying to treat them like Jesus through the C3 Leaders' Emergency Assistance Program that is providing prayer, career pathing, counseling, connection, cash and, through a partnership with Grub Hub, meals. Thanks for supporting us in this season.

For more information, please contact us at c3leaders@c3leaders.org.

This information is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in any examples are for illustrative purposes only. References to tax rates include federal taxes only and are subject to change. State law may further impact your individual results.