To help American workers and businesses mitigate the devastating economic effects of the coronavirus outbreak, in March the government signed into law the Coronavirus Aid, Relief and Economic Security (CARES) Act.
Included in the CARES Act are four key provisions that encourage individuals and corporations to help nonprofit organizations providing direct services and support to those impacted by COVID-19 in 2020.
- $300 deduction for those who claim the standard deduction.
Individuals who plan to take the standard deduction for their 2020 tax returns may claim an above-the-line deduction of up to $300 for cash donations to qualifying public charities. Previously, as many as 85 percent of Americans did not itemize their tax returns, making them ineligible for charitable deductions. Now that opportunity has changed.
- Charitable giving deduction limit increased to 100 percent of AGI on cash donations for those who itemize.
Donors may elect to receive a federal income tax deduction for charitable contributions of up to 100 percent of their AGI for certain cash donations made during calendar year 2020. Previously, this number was 60 percent.
- AGI limit for cash contributions increased to 25 percent of taxable income for corporations.
The AGI limit for cash contributions was also increased for corporate donors. Corporations can now deduct up to 25 percent of taxable income. Previously, this number was 10 percent.
- Qualified Charitable Distributions remain in 2020.
Although Required Minimum Distributions (RMDs) were waived for 2020, the CARES Act did not change the rules for Qualified Charitable Distributions (QCDs). QCDs allow taxpayers age 70 ½ or older to donate up to $100,000 directly to charity from their tax-advantaged retirement plans – such as IRAs, 401(k)s and 403(b)s – and bypass taxable income. Because the CARES Act allows individuals to deduct 100 percent of their AGI for cash charitable contributions, this effectively affords those over age 59 ½ benefits similar to a QCD if they take a cash contribution from their retirement account and give it to charity.
“Recognizing that economic stress often inhibits charitable donations, Congress added these provisions to help make philanthropy easier in 2020,” said Rick Brooks, CFP®, CFA®, Principal and Co-owner at Blankinship & Foster, LLC. “These provisions are scheduled to expire at the end of the year, so there’s not much time left to take advantage of them.”
These federal income tax deductions do not apply for gifts made to donor-advised funds, supporting organizations and/or private foundations.
CARES Charitable Act Deductions at The Foundation
Although federal law does not permit donor-advised funds to accept gifts afforded by CARES Act charitable deductions in 2020, it does represent an opportunity for donors to support scholarship, field-of-interest or designated funds, including programs and funds at The San Diego Foundation, such as:
San Diego COVID-19 Community Response Fund
Our COVID-19 Community Response Fund is rapidly deploying resources on a rolling basis to nonprofit organizations that are supporting low-income workers, families and vulnerable communities most affected by the coronavirus crisis.
To date, we have raised $56 million to support San Diegans in need and granted $53 million to local nonprofits. Your donation will help the people and organizations in our community most affected by coronavirus.
Black Community Investment Fund
The Black Community Investment Fund prioritizes and invests in community-led, innovative efforts that increase racial equity and generational wealth for Black San Diegans. Co-founded by the Central San Diego Black Chamber of Commerce and The San Diego Foundation, and led by an advisory council of San Diego leaders, the fund will focus grantmaking on four key pillars impacting economic prosperity among Black San Diegans: Education, Employment, Entrepreneurship and Housing.
This fund provides a new opportunity for philanthropists to help make San Diego County a better, stronger and more equitable region so every San Diegan can thrive, prosper and feel like they belong.
Community Scholars Initiative
The Community Scholars Initiative helps hundreds of young San Diegans prepare for, pay for, and persist through college. Despite their talent and aspirations, first-generation, low-income, and underrepresented students face unique and considerable barriers to achieving their academic dreams.
The Community Scholars Initiative works to provide financial support and critical wraparound services that bolster academic achievement through need-based scholarships for students, and grants to nonprofit organizations preparing students for success in the college environment. The initiative targets students from underrepresented groups, with a special focus on Latinx youth.
2020 Year-End Giving
As you continue to look for ways to help San Diegans in need, be sure to contact our Donor Services Team at (619) 814-1332 or firstname.lastname@example.org to speak to us about your year-end giving needs and to understand how CARES Act provisions may impact your charitable contributions in the 2020 tax year.