The CARES Act and Charitable Contributions

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on March 27, 2020. While the impact of the $2.2 trillion response bill is wide, summarized below are key provisions in the CARES Act related to charitable contributions. 

1. $300 Above-the-Line Charitable Deduction
   • A new above-the-line charitable deduction of up to $300 is available to taxpayers who do not itemize deductions.
   • This deduction applies only to qualified cash contributions and does not apply to cash contributions made to donor advised funds or supporting organizations. It also does not apply to carry-over contributions.
   • Currently, it's unclear whether this deduction will be allowed beyond 2020.

2. Charitable Contribution Limitation 
   • For individual taxpayers who do itemize deductions, the CARES Act temporarily suspends the 60% charitable contribution deduction limitation for qualified cash contributions.
   • Individual taxpayers who contribute cash to a public charity, or a limited number of private foundations, may deduct up to 100% of their adjusted gross income after taking into account other contributions subject to charitable contribution limitations.
   • Individual taxpayers can continue to carry forward any excess charitable contributions for five years.
   • Corporations may deduct charitable gifts up to 25% of the corporation’s taxable income (increased from 10%).
   • This is only effective in 2020.

3. Waiver of Required Minimum Distributions 
   • Required minimum distributions (RMDs) are waived for IRAs, including inherited IRAs, and other qualified retirement plans such as 401(k) and 403(b) plans.
   • RMDs are often considered in connection with gifts made through a Qualified Charitable Distribution.
   • This is only effective in 2020.

For more information about how the CARES Act may impact your specific financial situation, please consult with your tax, legal, or financial advisor(s).