CARES Act Fast Facts

Now is the time to invest in BGCS programs that support local youth and strengthen families through the CARES Act. In addition to making an impact on our community, your donation may qualify for an increased charitable deduction on your federal taxes.

Signed into law on March 27, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) creates charitable giving incentives for donors to support the critical work of nonprofit organizations like Boys & Girls Clubs of Greater Scottsdale.

New Tax Benefits to Donors

If you take the standard deduction:

Before this law, those taking the standard deduction didn’t get any tax benefit for their charitable donations. Under this new law, if you take the standard deduction when doing your taxes, the CARES Act allows for a one-time, above-the-line deduction of up to $300 ($600 for married couples filing jointly) in donations to qualified charities in 2020. This deduction is in addition to the standard deduction of $12,400 for an individual and $24,800 if filing jointly.

What this means for you: Because this is an “above-the-line” deduction, it will reduce your total taxable income by up to $300 (or $600 if filing jointly).

If you itemize your deductions:

Prior to the CARES Act, an individual itemizing their deductions could only deduct 60% of adjusted gross income (AGI) for charitable giving. If you itemize deductions when filing your 2020 taxes, the CARES Act allows you to deduct up to 100% of your AGI in contributions to qualified charities like Boys & Girls Clubs of Greater Scottsdale. Deductions of gifts in excess of 100% of AGI can be rolled over for use in future years.

If your organization wants to make a corporate gift:

The CARES Act now allows a deduction of up to 25% of the company’s adjusted taxable income for corporate gifts to qualified charities like Boys & Girls Clubs of Greater Scottsdale in 2020. The former limit was 10%.

Required minimum distributions (RMD) waived in 2020 for most donors:

RMD for individuals over age 70 ½ are suspended until 2021. This includes distributions from defined benefit pension plans and 457 plans. The RMD 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. The suspension of the RMD may dampen somewhat the incentive for a donor who makes a gift from their IRA to count toward that minimum. However, the tax benefit of the QCD remains.

The good news – 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. For more information, please talk with your retirement account administrator or accountant.

This information is not intended as legal or tax advice. Please consult with your tax advisor for specific guidance on these new tax law changes.