Tax Deduction Opportunities Under Cares Act
You may deduct gifts of cash to most public charities to offset as much as 100% of your income! For
the 2020 tax year only, you may deduct cash contributions to Heart Reach Neighborhood Ministries and most other public charities to offset up to 100% of your income.
Ordinarily, the income tax charitable deduction for cash gifts is
limited to 60% of your income. This 100% limit allows especially
generous donors to reduce their 2020 federal income tax to zero. If you
are even more generous, you can carry forward unused cash contribution
deductions for up to five years. Contributions to donor advised funds or
supporting organizations are not eligible for this deduction. Your
ability to deduct up to 100% of your income with cash gifts is reduced
by your gifts of appreciated assets such as publicly traded securities
and real estate for example. That means your charitable deductions in
2020 cannot exceed 100% of your income, but you may be able to carry
unused charitable deductions forward to future years.
It may not be the tax-wise choice to deduct up to 100% of your income. Because
federal income tax rates are progressive, it is not a given that it
will be to your advantage to deduct 100% of your cash contributions in
2020. Check with your financial or other advisors to determine whether
the 100% deduction makes sense for your specific circumstances.
If you don’t itemize you may reduce your taxable income by $300 for your charitable contributions in 2020. If
you do not itemize your deductions in 2020, you can still reduce your
taxable income by up to $300 for contributions of cash to public
charities using an “above the line” adjustment to reduce your taxable
Required minimum distributions from retirement plans are waived for 2020. Most
required minimum distributions from retirement plans have been
eliminated for 2020. Check with your financial advisor to see how this
temporary rule will apply to you. Minimum distributions that have
already started are still required from some defined benefit pension
plans, but some required minimum distributions that would have started
in 2020 may not have to start until 2021.
Qualified charitable distributions are still a great way if you are 70½ or older to make contributions. If
you are 70½ or older, a qualified charitable distribution (“QCD” or
“IRA charitable rollover”) allows you to make a tax-free gift of up to
$100,000 from your IRA. While the benefit of using a QCD to satisfy your
required minimum distribution has been waived for 2020, a qualified
charitable distribution remains a great way to make tax advantageous
contributions, especially if you don’t itemize your deductions.