The Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion federal relief package signed into law on March 27, 2020 is designed to help individuals, businesses, and nonprofit organizations facing economic hardship during the coronavirus (COVID-19) pandemic. The CARES Act recognizes the important role that nonprofit organizations like Washington University are playing in responding to the COVID-19 crisis.
Now more than ever, your generosity will make a difference. Several provisions in this new legislation may influence your decisions about charitable giving this year.
New Tax Incentives
- Taxpayers who take the standard deduction rather than itemizing their deductions will be able to claim a charitable deduction of up to $300 (per individual or couple if filing jointly) for cash donations made in 2020.
- In addition, the law increases the deduction limitation for charitable cash contributions from 60% to 100% percent of adjusted gross income (AGI) in 2020. A five-year carryover applies to contributions in excess of this amount, and donor-advised funds are excluded. For corporations, the deduction limitation is increased from 10% to 25%.
Changes for Retirement Accounts
- The CARES Act temporarily suspends required minimum distributions for the 2020 tax year.
- If you are 70 1/2 or older, you can still make a charitable gift of up to $100,000 from your IRA and exclude that amount from taxable income
- The law also allows penalty-free early withdrawals from qualified retirement plans for COVID-19-related expenses (up to $100,000).
- The SECURE Act, passed in December 2019, adjusted the minimum distribution retirement age to 72. The CARES Act places that change on hold through 2020.
Giving Strategies to Support WashU
As you consider your charitable giving in light of the CARES Act, the following gift planning strategies may enable you to enhance your giving and receive additional tax benefits. Please consult your financial, legal and tax advisors to confirm that these giving strategies are appropriate for your individual circumstances.
Accelerate a pledge payment to take advantage of 100% AGI deduction
Withdraw funds from your Qualified Retirement Plan – IRA/401(k)/403(b) and:
- Use the proceeds to donate a cash gift to Wash U – Given the increase to 100% deduction of AGI the charitable deduction may completely offset the income tax paid due to selling IRA assets. This also will reduce the Required Minimum Distribution (RMD) going forward.
- Create a Life Income Gift such as a charitable gift annuity. Please note that you will pay tax on the funds you withdraw. However, you also will receive a charitable tax deduction when you establish the gift annuity, which will offset some of the income tax paid.
- Take the standard deduction this year and make larger contributions from your IRA in 2021 (max is $100,000).
Stock that has decreased in value
- Sell the stock at a loss and make a cash gift to WashU.
- Realize the loss and deduction on your 2020 taxes.
Contact the Office of Planned Giving or call 800-835-3503.