CARES Act: Stimulus bill increases incentives for charitable giving
April 03, 2020 | by Anne Sherman ’94, Jeremy Arkin
In the recently-passed stimulus package called the CARES Act (“Coronavirus Aid, Relief, and Economic Security Act”), Congress recognizes the critical role being played by Duke and other nonprofit organizations, and the financial challenges being faced by many of these institutions, by including measures to encourage philanthropic giving in 2020.
Charitable deductions even if you don’t itemize
The biggest tax benefit of making a charitable gift usually lies in claiming an income tax deduction on your tax return. In most years, you only claim that deduction if you itemize – if you list all of your tax deductions together – things like mortgage interest, taxes paid to state and local governments and charitable gifts. Ninety percent of taxpayers don’t take this step because the standard deduction is larger than their total itemized deductions. In 2020, the standard deduction is $12,400 for individuals and $24,800 for married couples.
But the CARES Act provides a new opportunity for everyone to reduce taxes through charitable giving. In 2020, taxpayers who do not itemize can claim a deduction for up to $300 in cash gifts to public charities. In the eyes of the tax code, Duke is a public charity though it’s a private institution in other respects.
This is a wonderful incentive to make an impact on the causes that mean the most to you, including those directly helping to address the current crises. Duke Health has established a fund that allows donors to designate support to our greatest need, patient care or research, and the university has established a fund to support our most vulnerable students who are particularly affected by the impacts of the virus. We have also established a Duke-Durham fund to provide assistance to area non-profits, small businesses and community-based organizations.
We also hope our friends will use this opportunity to support other causes they are passionate about, including one of Duke’s Annual Funds, which provide critical support for every aspect of our mission and are especially important when the university needs flexible funding to meet pressing needs, like right now.
It is important to note that, though you might reap other tax benefits by donating stock, this new provision in the CARES Act only applies to gifts of cash, and it does not apply to gifts to donor advised funds, nor to deductions carried-over from prior years.
Increase in the cap on charitable deductions
Even if you itemize your income tax deductions, the CARES Act may provide a new benefit for you. Whereas normally you can deduct up to 60% of your adjusted gross income (AGI) for charitable gifts of cash to public charities, in 2020 you can elect to deduct up to 100% of your AGI!
This new rule does not apply to gifts of non-cash assets, nor does it apply to gifts to donor advised funds. Any deduction would be offset by other charitable deductions so you can’t deduct more than 100% of your AGI. Some people would actually save more by not taking advantage of this new provision and, instead, carrying forward unused deductions to future years. Our friends at PG Calc, a gift planning consulting and technology firm, explore this concept in a blog post about the CARES Act.
Temporarily waives required minimum distributions from IRAs and other retirement plans
The CARES Act waives required minimum distributions (RMDs) from most retirement plans and IRAs in the 2020 calendar year. This not only provides relief to plan participants and IRA owners who otherwise would have to pay income tax on their RMD, but it allows people to keep funds in their retirement plans during this period of market volatility.
If, however, you want to make a charitable gift and are 70 ½ or over, the Tax Code still allows you to transfer up to $100,000 from your IRA to Duke and other charities through a qualified charitable distribution (QCD), sometimes called a “charitable IRA rollover.” In any other year, the amount rolled over to charity as a QCD would count toward your required minimum distribution, but even in 2020 there are reasons to use a QCD to support Duke and your other favorite charities:
A QCD is an easy way to support charities you care about – particularly at this time of acute need;
The amount you transfer to charity as a QCD is not counted in your taxable income; and,
You reduce your IRA account balance by the amount of your QCD, and consequently, reduce future RMD.
Support Duke and unlock a stream of fixed income for life!
The uncertainty of these difficult times extends to the stock market. March 2020 was the toughest month for many investments since 2008. If you’re searching for a payment stream that would remain constant in good times and bad, and you’d also like to support the great work of Duke University, you may want to consider a charitable gift annuity.
A charitable gift annuity is an agreement between you and Duke where you make a gift of at least $10,000 (cash or appreciated stock), and Duke promises to pay you and a loved one a fixed income for life. Duke’s promise to pay is backed by its general assets and will not waver regardless of how the market changes. If you would like to learn more about how a charitable gift annuity or other planned giving strategies might work for you please contact the Office of Gift Planning.
During this trying time, we want to assure you that Duke continues to innovate, educate, research and serve with the courage and ambition that defines this university. Scores of Duke doctors, nurses, researchers and others are working to address the challenge posed by the novel coronavirus. Our faculty continues to teach students in new and creative ways, the Chapel is live-streaming Sunday services, and Duke Gardens continues to bloom. If you have questions about gift planning, the university's coronavirus response, or you simply want to talk to a friend, please don't hesitate to reach out. Stay safe and well!