The latest COVID relief package was signed into law on December 27, 2020 as part of the Consolidated Appropriations Act, 2021. The law provides approximately $900 billion in coronavirus relief funding, including extended unemployment benefits and one-time relief payments to many Americans. The new law also extends into 2021 two philanthropic provisions of the CARES Act of particular interest to donors:
- The law extends and modifies the “above-the-line” charitable deduction available to non-itemizers for cash gifts to public charities. For 2021 only, the law doubles to $600 the maximum amount joint filers may deduct. As in 2020, single filers or married filers who file separately are limited to $300.
- The legislation extends through the end of 2021 the CARES Act provision that increases the limitation on cash contributions to public charities in 2021 to 100% of adjusted gross income.
The CARES Act suspension of the required minimum distribution (RMD) from most retirement plans for 2020 does not appear to have been extended into 2021.
For more information on the original CARES Act provisions and their impact on charitable giving, please read our overview (published May 4, 2020) below:
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on March 27, 2020. The Act is a $2 trillion economic stimulus package to provide relief for individuals, businesses, nonprofits and state and local governments. Included in the Act are provisions intended to encourage charitable giving in 2020, which we have summarized below for your convenience.
$300 Reduction in Taxable Income for Cash Gifts by Non-itemizers
The Act allows non-itemizers, the 90% of taxpayers who claim the standard deduction, to reduce taxable income by a maximum of $300 for donations they make in 2020. This “above the line” adjustment will reduce adjusted gross income (AGI) and thereby reduce taxable income. The gifts must be cash and must be made to public charities (including the Potsdam College Foundation). Gifts cannot be made to donor-advised funds. Cash gifts must be made in 2020; carry-forward amounts from previous years do not qualify. Individuals who itemize cannot also claim the $300 income reduction.
A recent report clarified that the maximum $300 reduction is per tax return, not per individual. A couple filing jointly who do not itemize can declare a maximum of $300. We are awaiting further clarification as to whether the reduction will be available in tax years after 2020.
Temporary Increase of Cash Contribution Limits for Itemizers
For those who itemize, the limit on cash contributions is raised from 60% to 100% of adjusted gross income for the 2020 tax year only. The gifts must be cash and must be made to public charities (including the Potsdam College Foundation). Gifts to donor-advised funds are not eligible for this election. The 100% limit is reduced dollar-for-dollar by other itemized charitable deductions. For example, a donor who deducts 30% of their adjusted gross income in long-term appreciated property gifts will be able to also deduct up to 70% of their AGI for qualified cash gifts.
A donor who makes the 100% of AGI election may carry forward any unused qualified cash gift deductions up to five years. The carry forward will be subject to the normal 60% limitations, as are cash deductions carried forward from past years. Because federal income tax rates are progressive, it should not be assumed that it will be to a donor’s advantage to make the 100% of AGI election. You should consult your tax advisor to determine whether the 100% election is right for you.
Required Minimum Distributions (RMDs) Waived for 2020
Required minimum distributions for most individuals are suspended for 2020, including distributions from IRAs, 401(k)s, 403(b)s and most other defined contribution plans maintained by an employer for individuals. RMDs that would have had to start in 2020 don’t have to start until 2021. The SECURE Act recently raised the minimum age to begin taking RMDs from 70½ to 72.
Qualified Charitable Distributions (QCDs) allow donors aged 70½ and older to make distributions directly from their IRAs to charity. It is important to note that QCDs are defined by separate legislation and are not impacted by either the SECURE Act or the CARES Act. Donors aged 70½ and older may still make gifts to charity totaling up to $100,000 each year directly from their IRAs. Donors do not get a charitable deduction for the transfer, but they also do not declare the transfer as taxable income. QCDs may be made to charity in combination with either the $300 above-the-line income reduction or the 100% contribution limit.
The COVID-19 pandemic is impacting the lives of all Americans. It is especially in times such as these that we join together to help each other. Charities play a special role in helping the needy, caring for the elderly and sick and educating young adults who will go on to help solve the problems society faces. Your giving helps charities accomplish their mission. Thank you.
Everyone’s financial position is unique, so it is important to consult your tax counsel and retirement plan administrator before making your gifts.
Contact us for help with questions:
Jason Ladouceur, Senior Director of College Advancement
Potsdam College Foundation
44 Pierrepont Ave., Potsdam, NY 13676
The Raymond Legacy Society celebrates those who have made an estate gift arrangement to support the College, as well as those who have established a permanent endowed fund. The Society also provides educational material on giving to assist alumni and friends in achieving their philanthropic goals. For more information, visit potsdam.edu/legacy.
This information does not provide legal or financial advice, nor is it a comprehensive review of the topic. You should consult your attorney, tax advisor and SUNY Potsdam before making or planning your gift. (rev. 01/07/20)