The CARES Act And Charitable Giving

The Coronavirus Aid, Relief, and Economic Security Act—or CARES Act—signed into law on March 27, 2020, includes several provisions of particular interest to individuals (and corporations) who may be considering charitable donations in tax year 2020. Highlights of those changes are noted below and should be discussed with your professional advisors to determine their applicability to your individual tax situation.

  • 100% of AGI limit available for cash gifts to most public charities: For the 2020 tax year, individuals may deduct cash gifts to public charities in an amount up to 100% of their adjusted gross income (AGI). Gifts to donor advised funds (DAFs) or supporting organizations (SOs) are not eligible for this special election. Similarly, it appears that gifts to split-interest entities such as charitable remainder trusts and charitable lead trusts would not be eligible. Pending further guidance, we view the law as unclear regarding gifts made in exchange for a charitable gift annuity.
     
  • Non-itemizers now eligible for $300 charitable deduction: A reduction in taxable income is available in 2020 for individuals who do not itemize their deductions. It is an “above-the-line” deduction from taxable income for cash gifts to public charities and is limited to $300 per taxpayer. It is not available for gifts to DAFs or SOs.
     
  • Required minimum distributions waived in 2020 for most individuals: Most individuals will not have a required minimum distribution (RMD) from their retirement plans in 2020. RMDs will not be required from IRAs, 401(k)s, 403(b)s, and most other defined-contribution plans. (Minimum distributions that have already started are still required from “defined benefit” pension plans and some 457 plans.) Individuals should check with their retirement plan administrators to see if this provision applies.
     
    A note about Qualified Charitable Distributions: The change in the RMD rules may reduce the incentive for those age 72 or older (the mandatory age for an RMD) to make a qualified charitable distribution (QCD) from an IRA in 2020. However, for those age 70½ and older (the age at which one is eligible to make a QCD), a QCD this year is still permitted and will allow itemizers and non-itemizers alike to direct up to $100,000 from their IRA to charities in a tax efficient manner should they wish to do so.
     
  • Limit on cash contributions from corporations increased to 25% in 2020: The taxable income limit that applies to cash contributions made by corporations to charity (again, except to DAFs and SOs) is increased from 10% to 25% for 2020. The usual 10% limit still applies to other charitable contributions by corporations, and those contributions reduce the 25% limit dollar-for-dollar. Qualified cash contributions in excess of the 25% limit can be carried forward for up to 5 years under the usual limits.

Due to the outpouring of offers of support from MIT alumni and friends around the world, the Institute has created two new funds to help with the Institute’s research and emergency outreach efforts related to Covid-19, in addition to the preexisting Student Life, Wellness and Support Fund. A special online giving form allows individuals to contribute to any of these three funds.

For more information, contact your financial advisor or Amy Goldman, senior director of gift planning, at goldmana@mit.edu.