by Robert Heuermann, Executive Director
Back in March, the United State Congress passed, and the President signed into law, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion economic stimulus package legislated to provide immediate relief for taxpayers.
There were several initiatives that have affected charitable giving including to our churches and schools. These new regulations and rules are designed to make it easier and to encourage us to continue to support the charitable and non-profit organizations that aid our communities during these difficult times.
First, there is a new charitable tax deduction for taxpayers who use the standard deduction to determine their taxes. You will now be able to claim a charitable deduction up to $300 per taxpayer ($600 for a married couple) in annual charitable contributions. This deduction is an “above the line” adjustment to income that will reduce your adjusted gross income (AGI), and thereby reduce taxable income. This is available only to people who take the standard deduction (for taxpayers who do not itemize their deductions). A donation to a donor advised fund does not qualify for this new deduction.
Second, for taxpayers who itemize deductions, for 2020 taxes you can elect to deduct donations up to 100 percent of your 2020 AGI (up from 60 percent previously). As always, the rules for charitable giving must be followed. The new deduction is for gifts that go to a recognized charity, such as your church or Catholic school. Again, the higher deduction does not apply to donations directly to a donor advised fund.
And finally, IRA required minimum distributions are waived in 2020 for most people. Required minimum distributions (RMD) that would have had to start in 2020 do not have to start until 2021, including distributions from defined benefit pension plans and 457 plans.
Even so, making a Qualified Charitable Distribution (QCD) from your IRA this year will allow itemizers and non-itemizers alike to direct up to $100,000 from an IRA to charities in a tax-efficient manner. The takeaway: 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.
If you would like to discuss how Catholic United Financial Foundation can assist you in your charitable giving for 2020, please contact the Foundation or your local Catholic United Sales Representative today.
3499 Lexington Ave N
St. Paul, MN 55126
Neither Catholic United Financial nor the Catholic United Financial Foundation is permitted to provide tax or legal advice. The information provided here is based on our understanding of the laws and regulations currently in effect. You should consult your tax preparer or tax attorney to see if you qualify for these programs and if they are appropriate for your specific tax situation.