The CARES Act and Charitable Contributions

The Coronavirus Aid, Relief, and Economic Security (CARES) Act makes it easier for you to make charitable contributions from Individual Retirement Accounts (IRAs.) It was designed, in part, to help qualifying nonprofits during the pandemic when their services are needed most.

Previously, charitable contributions could only be deducted if taxpayers itemized their deductions. However, taxpayers who don’t itemize deductions may take a charitable deduction of up to $300 for cash contributions made to qualifying organizations. For the purposes of this deduction, qualifying organizations are those that are religious, charitable, educational, scientific or literary in purpose. The $300 Universal Charitable Deduction – again, now available to those who do not itemize on their federal income taxes – has been extended to 2021. In addition, the law now makes it clear that for gifts after January 1, 2021, the deduction is $300 for a single individual, and $600 for a married couple filing a joint return. As with the previous law, this deduction is not available for gifts to donor advised funds or supporting organizations.

The CARES Act also temporarily suspends limits on charitable contributions and temporarily increases limits on contributions of food inventory. More information about these changes is available on www.IRS.gov.

In addition, the 100% income limitation for cash gifts has been extended to 2021. This limitation – for cash gifts only – means that the donor can deduct an amount up to their adjusted gross income (but can carry forward the excess for up to five years). Again, this special tax benefit is not available for gifts to donor advised funds or supporting organizations.

As with all charitable contributions, we suggest you speak to your financial planning advisor or legal representative for specific tax details. Remember, when you make a gift to the Community Foundation of Southern Wisconsin or any of its qualifying funds, your gift lasts in perpetuity because it gets placed in an endowment fund to allow grants to be made even for future generations to benefit. Thank you for helping us fulfill our mission of meeting the needs of our communities for good, forever. For a look at all ways to make a gift to the Community Foundation, click here.

Information from: Community Foundation Research and Training Institute and IRS.gov

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