The CARES Act (effective 2020)
Like you, Bentley is adapting and changing in response to the COVID-19 pandemic and accompanying economic uncertainty. As we adjust to our new reality, we would like to bring to your attention new tax incentives for charitable giving that were included in the March 2020 Coronavirus Aid, Relief, and Economic Security Act, or CARES Act. The CARES Act, which addresses the far-reaching effects of the COVID-19 pandemic, provides additional tax incentives to encourage charitable giving.
You may deduct gifts of cash to most public charities to offset as much as 100% of your adjusted gross income (AGI). For the 2020 tax year only, you may deduct cash contributions to Bentley and most other public charities to offset up to 100% of your AGI. Ordinarily, the income tax charitable deduction for cash gifts is limited to 60% of your AGI. This 100% limit allows especially generous donors to reduce their 2020 federal income tax to zero. As usual, any unused cash contribution deductions may be carried forward 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 AGI with cash gifts is reduced by your gifts of appreciated assets such as publicly traded securities and real estate. That means your charitable deductions in 2020 cannot exceed 100% of your AGI, 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 AGI. 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. We encourage you to check with your financial and 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 income.
Most required minimum distributions (RMDs) from retirement plans are waived for 2020. Please 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 RMDs that would have started in 2020 may not have to start until 2021.
If you are 70½ or older, qualified charitable distributions (QCDs) are still a great way to make contributions. If you are 70½ or older, a QCD (also known as an IRA charitable rollover) allows you to make tax-free gifts of up to $100,000 per year from your IRA to charitable organizations such as Bentley. While the benefit of using a QCD to satisfy your RMD has been waived for 2020 in most cases, a QCD remains a great way to make tax-advantaged contributions, especially if you don’t itemize your deductions.
You have important priorities for your family and loved ones, and we know that their health and financial well-being come first. When you are ready, we are here to help you shape a charitable gift plan that suits your needs and allows you to support Bentley’s important mission. If you have any questions, please feel free to contact us at firstname.lastname@example.org or leave a message to get a timely reply from Liz Siladi at 781-891-2475 or Kris Otto at 781-891-2586.