CORONA VIRUS AID RELIEF AND ECONOMIC SECURITY (CARES) ACT
Though there is still much to be learned about COVID-19, one thing we all know for certain is that every American is likely to feel some degree of financial impact from the disease.
With so much uncertainty around the economy and millions of people out of work, nonprofits who depend upon the generosity of donors, expect a tough road ahead. Here at the Lustgarten Foundation, we already are feeling the sting of cancelled or rescheduled fundraising events and anticipate some donors may need to cut back on their financial support. Fortunately, the recently passed Corona Virus Aid Relief and Economic Security (CARES) Act, includes several provisions to help encourage continued support of non-profit organizations including:
· Above the Line Deduction for Taxpayers Using the Standard Deduction
This is a universal, non-itemized deduction of up to $300 for cash donations. In other words, you can claim the $300 deduction even if you aren’t itemizing and it will lower your overall taxes. The incentive applies to cash contributions made in 2020 and can be claimed on tax forms next year.
· Increased Deductibility on Gifts by Individuals
The CARES Act also lifts the existing cap on itemized annual contributions from up to 60 percent of Adjusted Gross Income (AGI) to up to 100 percent of AGI.
We recommend consulting with a qualified financial advisor to determine the best gifting strategy for your specific circumstances; however, the CARES Act does provide several unique opportunities for donors. Here are two options to discuss with your financial advisor:
· A donor may have unrealized gains and/or losses in their investment portfolio. By selling these securities they can generate cash which is required for the deductible charitable contributions of up to 100% of AGI. By selling securities which have declined in value below cost, the donor can realize a capital loss and contribute the cash without regard to percentage limitations. The capital loss may be used to offset a gain on the sale of appreciated assets, again generating cash that can be used for charitable contributions without percentage limitations. Even if a donor recognizes capital gain, donating the sale proceeds could eliminate taxation of any ordinary income, leaving only capital gains to be taxed.
· A taxpayer can in effect make a tax-free rollover of any amount to charity in 2020 by making a taxable withdrawal from an IRA that will be included in income, giving the cash to a public charity and offsetting the income completely by the charitable deduction, regardless of the amount.
For more information, check out this Forbes article on the CARES Act and Charitable Giving: https://www.forbes.com/sites/berniekent/2020/04/03/giving-more-than-60-of-income-to-charity-cares-act-says-deduct-it/
The Lustgarten Foundation is a designated 501c3.EIN # 31-1611837.