Charitable Giving and Tax Changes

We would like to bring to your attention new tax rules for charitable giving included in the recently enacted Coronavirus Aid, Relief, and Economic Security Act, or “CARES Act” which recognizes the important role non-profits like PBS Wisconsin plays during the pandemic and provides additional tax benefits for taxpayers supporting them.

To help you make informed decisions on how you can continue to support the causes you are passionate about in a way that benefits you, here are a few key provisions that may affect you and your charitable goals.

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Non-Itemizers eligible for a $300 tax deduction

The bill makes a new deduction available for up to $300 per taxpayer in annual charitable contributions. This is particularly beneficial to people who take the standard deduction when filing their taxes (in other words, for taxpayers who do not itemize their deductions). It is calculated by subtracting the amount of the donation from your gross income. It is an “above the line” adjustment to income that will reduce your AGI, and thereby reduce taxable income.

Itemizers benefit, too

For those who do itemize their deductions, the new law allows for cash contributions to qualified charities such as Friends of PBS Wisconsin to be deducted up to 100% of your adjusted gross income for the 2020 calendar year.

Ordinarily, the income tax charitable deduction for cash gifts is limited to 60% of your income. This 100% limit allows donors to potentially reduce their 2020 federal income tax to zero. 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.

Required Minimum Distributions waived in 2020

For the year 2020, there will be no mandatory Required Minimum Distributions (RMDs) from retirement accounts (whatever the age of the owner). The minimum age for making a tax-free transfer from an IRA to a charity remains at 70½, and the annual limit remains at $100,000.

Qualified Charitable Distributions are still a great way to make contributions

Even though RMDs are waived, if you are 70 ½ or older, you can still use your IRA to receive tax relief on giving to charities such as Friends of PBS Wisconsin. You can do so with a qualified charitable distribution (QCD) from your IRA. The funds are directly transferred from your IRA to the Friends of PBS Wisconsin and are put to use right away. A QCD generates neither taxable income nor a tax deduction, so you benefit even if you do not itemize your deductions.

Changes to corporate giving

The CARES Act increased the cash contribution limit for corporations from 10% to 25% in 2020. Charitable contributions in excess of 25% may be deducted for up to five years under the usual limits. The limitation for deductions of contributions of food inventory by a corporation also increased from 15% to 25%.

To read a summary of the CARES Act, please visit:

https://gop-waysandmeans.house.gov/wp-content/uploads/2020/03/CARES-Act-Summary.pdf

Or, to read the full text of the CARES Act, visit:

https://www.congress.gov/bill/116th-congress/senate-bill/3548/text

For additional information, please contact our Major and Planned Giving Department at (608) 231-2131. Please note: this information does not constitute legal or financial advice and we encourage you to consult with your tax advisor about these strategies and whether they may be appropriate to your individual circumstances.