CARES Act, Philanthropy & COVID-19: How You Can Help
Brooke Boone Kelly, CFP®, Wealth Management Advisor | Ryan Richardson, CFP®, Wealth Management Associate Advisor | May 1, 2020
The signing of the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27,2020, not only provided aid to many Americans and small businesses affected by the Coronavirus pandemic, but also made significant changes to the charitable giving rules to encourage individuals and corporations to donate during these unprecedented times. The Weatherly team has outlined the key provisions that may impact your 2020 giving and ways to support during the COVID-19 pandemic.
Some of the most notable changes to giving due to the CARES act include:
- Above- the-line Charitable Deduction
- Taxpayers who claim the standard deduction in 2020 can deduct up to $300 above- the-line, or against their gross income, for cash contributions to charity.
- AGI Limitation for Cash Donations
- Historically, individuals could deduct up to 60% of adjusted gross income (AGI) for cash contributions to eligible charities. Under the CARES Act, taxpayers can deduct up to 100% of their AGI for the 2020 tax year.
- Corporations can now deduct up to 25% of AGI this year, up from 10% in prior years.
- Any donations above the new 2020 limitations can be carried over for up to five years.
- To take this deduction, taxpayers must:
- Itemize their deductions
- Donate in cash direct to a public charity.
- The new increased limits do not apply to cash contributions to supporting organizations or Donor Advised Funds (DAFs). The old limit of 60% AGI will remain for such cash contributions.
- The new limits do not apply to contributions of publicly traded appreciated securities. The 30% of AGI limitation will remain the same for 2020 stock donations.
- Qualified Charitable Distributions (QCDs) – and Required Minimum Distributions (RMDs)
- In prior years, clients over age 70.5 who were taking RMDs from their IRA accounts may have completed a Qualified Charitable Deduction (QCD). Tax law allows donors to give up to $100,000 of their RMD direct to a qualifying charity of their choosing. The amount sent to charity counted towards the donor’s RMD for the year but is excluded from taxable income. Additional information about QCDs in our charitable blog post.
- As highlighted in our CARES Act Write Up, one of the most significant changes under the Act is the waiving of Required Minimum Distributions (RMDs) from certain eligible retirement accounts in 2020.
- Like prior years, a 2020 QCD direct to charity will not show up as taxable income to the individual. However, the distribution will not offset any RMDs as they are not required in 2020 tax year.
- Given these changes, it may be more beneficial to utilize a different charitable strategy for 2020 tax year. Weatherly is here to help explore the most impactful philanthropic giving approach for you this year.
The Role Philanthropy Can Play
Philanthropy and private sector support can play a key role in getting emergency funding and resources to those in need during times of crisis. Since the beginning of the global pandemic through 4/28/2020, more than $8.7 billion has been donated to the COVID-19 outbreak and various relief efforts according to the Center for Disaster Philanthropy (CDP) and its partner, Candid. To encourage further philanthropic activity, the GivingTuesday nonprofit organization has arranged a GivingTuesdayNow emergency event on 5/5/2020. This event is meant to unify, raise awareness, and support each other, our communities and global nonprofits during these unprecedented times.
Ways to Support COVID-19
During this global pandemic, philanthropic support can make the greatest difference in a several different areas, including, but not limited to: hunger; food and shelter, basic health services for vulnerable populations; Personal Protective Equipment (PPE) and medical needs for healthcare workers; Research and Development initiatives for vaccines, treatments, diagnostics, and antibody testing; ventilators; social service organizations; community foundations; and sustaining current nonprofits with funding gaps that may exist in these tough times. We have complied a list of ideas and resources on how to support in these areas via monetary or nonmonetary means during GivingTuesdayNow and beyond:
- The GivingTueday nonprofit organization has six ways to show generosity during these difficult times, including: Give/Donate, Thank those on the front lines, Volunteer virtually, Support your local community and small businesses, Show Kindness to your neighbors and friends, and Respond. These are all relevant to GivingTuesdayNow and throughout the pandemic.
- If you would like to give via monetary means, we recommend looking to organizations in your community that you may already support. Many nonprofits are struggling to stay afloat as they are not holding events or galas that typically provide much of the funding needed to carry out their philanthropic missions.
- For any new organization you would like to give to, it is important to do your research prior to donating. Giving Compass and the National Center for Family Philanthropy have created a list of funds across the United States providing immediate and long-term relief to COVID-19.
- Fidelity Charitable had “A Conversion with the CDC Foundation” webinar with various ways to help with COVID-19 at the Local, National, and Global needs.
- As many of us are social distancing and sheltering in place, virtual volunteer opportunities to aid those impacted by COVID-19 can be found here.
How Weatherly Can Help
Given the charitable giving changes under the CARES Act, the Weatherly team is here to collaborate with your CPA and team of professionals on a 2020 giving strategy that fits with your financial plan and philanthropic goals. We are also here to help facilitate any grants from or contributions to your Donor Advised Fund (DAF)2 for GivingTuesdayNow or future 2020 giving. As always, our team welcomes a dialog on how we can accomplish your charitable giving goals and positively impact our community and world.
Resources:
- https://disasterphilanthropy.org/disaster/2019-ncov-coronavirus/
- Link to Charitable Blog: https://www.weatherlyassetmgt.com/blog/39tis-the-season-of-charitable-giving-and-tax-planning/
- https://www.wealthmanagement.com/philanthropy/cares-act-sweetens-pot-charitable-giving
- https://3b4nu03zhqkr21euttbrqaxm-wpengine.netdna-ssl.com/wp-content/uploads/2020/04/20200409_CARES_RESOURCE.pdf
- https://now.givingtuesday.org/about/
- https://www.fidelitycharitable.org/guidance/disaster-relief/how-to-help-novel-coronavirus.html
** The information provided should not be interpreted as a recommendation, no aspects of your individual financial situation were considered. Always consult a financial professional before implementing any strategies derived from the information above.