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New Charitable Giving Provisions in the CARES Act

To encourage more charitable giving in 2020, the recently enacted government stimulus bill (the "CARES Act") provides some additional tax relief for donors. This makes it easier to give and save at the same time.

For those who don’t itemize ~  $300 above the line deduction

If you take the standard deduction on your 2020 tax return (the one that you'll file in 2021), you can claim a brand new "above-the-line" deduction of up to $300 for cash donations to Abe’s Garden you make this year.  Donations to donor advised funds and certain organizations that support charities are not deductible.  Normally, you have to itemize on Schedule A to get a tax break for charitable donations. In this case, though, it's the other way around—if you itemize, you can't take this new deduction.

For those who do itemize ~ cash gifts are now 100% deductible

If you itemize on Schedule A of your tax return, you can claim a deduction for your charitable donations. However, the amount you can deduct for cash contributions to Abe’s Garden is generally limited to 60% of your adjusted gross income (AGI). Any cash donations over the 2020 AGI limit can be carried forward for up to five years and deducted later, subject to 60% of AGI.

The CARES Act lifts the 60% of AGI limit for cash donations made to Abe’s Garden in 2020 (although there's still a 100% of AGI limit on all charitable contributions). This means itemizers can deduct more of their charitable cash contributions this year, which will hopefully boost charitable giving. As with the new above-the-line deduction, donations to donor advised funds, supporting organizations, and private foundations don't count.

Qualified Charitable Distribution from IRA still allowable

Although the required minimum distributions (RMDs) from IRAs, 401(k)s, 403(b)s and other retirement plans have been suspended for 2020, those age 70½ and older may continue to use some, or all, of their RMD from an IRA to make contributions to Abe’s Garden.  This is still a qualified charitable distribution (QCD) and the amount of the QCD will be excluded from your income as in past years.

Disclaimer:  This information is not legal advice.  Please be sure to consult with a knowledgeable tax or financial adviser, or with your IRA custodian to ensure these transactions are executed correctly.