On March 27, the President signed into law the Coronavirus Aid, Relief and Economic Security (CARES) Act. Details are still a bit unclear, but here is what we know up to now.
First, there will be a new “above the line” charitable deduction of up to $300 ($600 for a married couple filing jointly). The phrase “above the line” means that a taxpayer can deduct charitable gifts up to $300 even if they don’t itemize their charitable deductions. This is important, because after the passage of tax reform in 2019, only about 10% of Americans itemize their taxes. The new law would allow them to deduct up to $300 from their taxable income. Importantly, what we have read so far indicates that those who itemize won’t get the $300 above the line charitable deduction.
The $300 charitable deduction is available only for cash gifts to public charities — but gifts to donor advised funds do not qualify.
In addition, for 2020, the income limit for cash contributions to charity rises to 100% of income (from the current 60% limit). As with current law, any cash gifts in excess of that limit can be carried forward to the next year. Also, cash gifts to donor advised funds do not qualify for the 100% income limitation.
Another important provision is the repeal of required minimum distributions (RMD) for 2020. This is important because donors can use a Qualified Charitable Deduction (QCD) to make a gift to charity to satisfy their RMD requirement. For 2020, no one will be subject to the RMD requirement — though they can still, if they wish, make a QCD gift.
Finally, for taxes due for 2019, the tax filing deadline has been moved to July 15, 2020.
These items are changing raplidly, and we will post additional information as it becomes available.