Cares Act Tax Benefits for 2020
The Coronavirus Aid Relief and Economic Security Act (CARES) provides some
new tax incentives to promote charitable giving in 2020.
Standard Deduction: For people who take the Standard Deduction, the Cares Act allows you
to take a tax deduction of $300 per taxpayer ($600 per married couple)
for a gift to a qualified charity, like Methodist Hospital Foundation.
This deduction is an above the line adjustment to income that reduces
Adjusted Gross Income (AGI), and therefore reduces taxable income.
Itemized Deduction: People who file for itemized deductions in 2020 can take a deduction
for charitable gifts of up to 100% of your AGI for 2020 only. Previously,
the limitation was typically 60% of AGI.
The new law applies only to
cash gifts to charity. Unfortunately, these new limits do not apply to gifts
of appreciated stock or real estate. If you give cash through a private
foundation, regular deduction rules apply. And while the organizations
that manage donor advised funds (DAF) are considered public charities,
you do not a get the increased deduction for donating cash to your DAF.
You might instead consider making that cash gift directly to Methodist
Corporate Deduction: The Cares Act allows corporations to take a tax deduction of up to 25%
of taxable income in 2020, up from the previous limit of 10%.
Changes for IRA gifts in 2020: The Required Minimum Distribution (RMD) from traditional IRA’s is
waived in 2020, which means there’s no excise tax of 50%, if you
don’t take your RMD. Nevertheless, if you turned 70 1/2 before January
1, 2020 and have an IRA that you don’t need for income, it is still
a tax efficient way to make a charitable gift because direct contributions
from your IRA are considered qualified charitable distributions and aren’t taxed.
So, regardless of your tax situation or level of giving,
2020 is a great year to do good! Please consider making a gift to Methodist Hospital Foundation today!