CARES Act Offers Significant Benefits for Personal Income Tax Planning

Supporting the Arts

An exterior image of The Smith Center

 

The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, signed into law on March 27, 2020, includes several provisions that may impact your charitable giving this year.

As the Act is a complex law, this blog is intended only as a summary of provisions that may be important for donors. As always, we encourage donors to always consult with their own professional advisors before making a gift.

New charitable deduction for taxpayers who do not itemize

Beginning in 2020, individuals can deduct $300 in charitable contributions from their gross income even if they do not itemize their deductions. Donations must be made in cash to a charity. Gifts of appreciated securities, and gifts to a donor advised fund or supporting organization, do not qualify. Although the permissible amount is modest, it is a new benefit available to donors with more restricted budgets.

No cap on charitable deductions for taxpayers who do itemize

Donors who itemize their deductions can usually deduct cash contributions up to 60% of their adjusted gross income. For 2020, that cap is lifted, and donors contributing cash to charity may deduct up to 100% of their income, a significant tax savings for anyone able to contribute larger amounts. Again, this is only for gifts of cash, and only for gifts made directly to charity (not to donor-advised funds or supporting organizations).

No required minimum distributions, but qualified charitable distributions still possible.

The CARES Act eliminates required minimum distributions (RMDs) from many retirement plans in 2020. Some donors have been using their RMDs for tax-advantaged charitable gifts by making a qualified charitable distribution (QCD) directly to charity. Under the CARES Act it is still possible for donors who are 70 1/2 or over to contribute up to $100,000 directly to a charity without paying tax on the distribution. This remains a beneficial way for donors to make gifts to The Smith Center.

“Our donors make everything we do possible,” says Emma Durant, Smith Center director of philanthropy. “Their commitment during this holiday season will make a big difference in helping us to reopen and continue our mission of inspiring artists, audiences and our diverse community.”

Learn More

Click here to learn more about end-of-year giving opportunities with The Smith Center.