As part of the CARES Act, passed by Congress earlier this year in response to the COVID-19 pandemic, you have the opportunity to take advantage of a new, universal deduction and increased incentives. This means that your support to charitable organizations like St. Vincent de Paul Louisville has additional benefits this year. The following information will help you consider these incentives as you plan your end of 2020 charitable giving and tax strategy.
CARES Act 2020 Tax Year Benefits
Standard Deduction
Many people do not itemize their federal returns because the standard deduction ($12,400 for single/$24,800 for married) exceeds their deductible expenses. In 2020, the CARES Act provides an “above the line” charitable deduction for cash gifts up to $300 when using the standard deduction; this creates a dollar for dollar reduction in a donor’s adjusted gross income (AGI), reducing their tax liability.
Itemized Filers
Cash Gifts: Income tax deductions for cash contributions were previously limited to 60% of adjusted gross income (AGI). CARES Act increases the limit to 100% of AGI for 2020.
Gifts of Appreciated Assets: If you support SVDP through the sale of stocks, bonds, or real estate that have appreciated in value and been held for at least one year, you are entitled to an immediate charitable income tax deduction for the full fair market value of the assets (up to 30% of your AGI) and avoid capital gains tax that would be due upon the sale. Deductions beyond the 30% threshold can be carried forward up to five additional tax years.
IRA Distributions
The CARES Act eliminated the required minimum distribution from an IRA for people over age 70½. However, because it also increased the limit for tax deductions on cash gifts to 100% of AGI (see itemized info), people over 59½ can take a cash distribution from their IRA, avoid early withdrawal penalty, donated the cash to SVDP, and receive a charitable deduction up to 100% of their AGI.
Please consult your legal or tax advisor for specific advice regarding the tax-deductibility of charitable contributions.
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