The U.S. Congress has passed legislation to respond to the rapidly changing reality created by the COVID-19 pandemic, including the CARES (Coronavirus Aid, Relief, and Economic Security) Act which contains some important provisions that may impact the charitable giving plans of our U.S. supporters. They include:
- If you do not plan on itemizing your tax filing for 2020, and instead take the standard deduction, you can deduct up to $300 of charitable contributions to mothers2mothers (m2m). The standard deduction for 2020 is as follows:
- Single – $12,400
- Head of household – $18,650
- Married filing Jointly – $24,800
- Married filing separately – $12,400
- These amounts increase by $1,300 per tax payer for those that are over 65 and/or blind
- If you itemize your deductions, you can deduct cash contributions to m2m of up to 100% (up from 60%) of your modified adjusted gross income from 2020, and amounts in excess of that can carry over for five years.
- For C Corporations, the deduction limit for charitable contributions is now 25% of taxable income, up from 10%, with modifications. Any excess contributions can be carried over for five years.
- In 2020, Required Minimum Distributions (RMD) from IRAs and other retirement plans have been suspended. When those RMDs resume in 2021, you can make a Qualified Charitable Distribution (QCD) directly from your IRA to m2m and this will directly reduce the taxable amount of your IRA distributions. That way, you can save on your taxes and still take the full standard deduction.
We hope this CARES Act primer is useful when thinking about your charitable goals, but please note that none of the above information is either legal or tax advice. Please consult with an attorney or tax advisor for the most up-to-date tax information and state laws that may affect final tax calculations.