COVID-19 Stimulus Package Provides Opportunity for Donors
Categories: Public Policy
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion+ economic stimulus package, was signed into law March 27. There are a number
of components to the act that intend to support critically important services provided to communities across the country by not-for-profit organizations
like the Brain Injury Association of America (BIAA).
What does this mean for BIAA’s supporters?
A new tax deduction is available when you donate to BIAA:
Up to $300 per taxpayer ($600 for a married couple) in annual charitable contributions is available to people who take the standard deduction (for taxpayers who do not itemize their deductions). It is an “above the line” adjustment to income that will reduce a donor’s adjusted gross income, and thereby reduce taxable income. A donation to a donor-advised fund does not qualify for this new deduction. To be eligible for the deduction, you would have to give a donation to a qualified charity like BIAA. If you have already made a donation this year (since January 1, 2020), that contribution counts toward the $300 cap.
There are new charitable tax deduction limits:
As part of the bill, individuals and corporations that itemize can deduct much greater amounts of their contributions. Individuals can elect to deduct donations up to 100% of their 2020 adjusted gross income (up from 60% previously). Especially generous donors can reduce their 2020 federal income tax to zero and those who are even more generous can carry forward unused cash contributions up to five years. Corporations may deduct up to 25% of taxable income, up from the previous limit of 10%. The new deduction is for gifts that go to a public charity like BIAA. The old deduction rules apply to gifts to private foundations. The higher deduction does not apply to donations directly to a donor advised fund.
And the required minimum distributions are waived in 2020 for most donors:
Required minimum distributions that would have had to start in 2020 do not have to start until 2021, including distributions from defined benefit pension plans and 457 plans. The required minimum distribution is an attractive way for donors to make a significant charitable gift directly from their individual retirement account (IRA) to a charity through a qualified charitable contribution while avoiding taxable income. Making a qualified charitable distribution this year will still allow itemizers and non-itemizers alike to direct up to $100,000 from their IRA to charities like BIAA in a tax-efficient manner.
A Win-Win Opportunity
This is the first time Congress has passed this type of giving incentive in response to disaster or national emergency, providing a way for both people with brain injury and the generous donors who support them to benefit. Further, the inclusion of an expanded charitable giving incentive is a critical acknowledgement by Congress that the work of nonprofits like BIAA are essential services. Now more than ever, BIAA will continue to advocate for legislation that benefits individuals with brain injury, provide support through our National Brain Injury Information Center, educate professionals to improve the quality of care, and seek cures for chronic brain injury through BIAA-funded research.
For more information, please contact Robbie Baker at (703) 761-0750, ext. 648.
This information is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. References to tax rates include federal taxes only and are subject to change. State law may further impact your individual results.