CARES (Coronavirus Aid, Relief, and Economic Security Act) Act update:
The impact of the COVID 19 pandemic may have its consequences in terms of your financial and personal health and that this may impact your situation in terms of methods and ability to give to Saint Bede. Several parishioners have had questions about the CARES act so so here is some general guidance that you might find helpful:
Required minimum distributions waived in 2020: RMD’s for individuals over age 70 ½ are suspended until 2021 (even though the age was scheduled to move to 72). This includes distributions from defined benefit pension plans and 457 (deferred compensation) plans. The RMD is still an attractive way for donors to make a significant charitable gift directly from their IRA to a charity through a qualified charitable contribution (QCD) while avoiding taxable income. The suspension of the RMD may diminish the immediate incentive for a donor who makes a gift from their IRA to count toward that minimum. However, the tax benefit of the QCD remains.
Bottom line – donors directing a QCD to charity this year (up to $100,000 per individual) will still reduce their taxable IRA balance. This allows all taxpayers, both itemizers and non-itemizers, to make gifts from their IRA to charities in a tax efficient manner.
New Deduction Opportunity: The bill makes a new deduction available for up to $300 per taxpayer ($600 for a married couple) in annual charitable contributions. This is particularly beneficial to people who take the standard deduction when filing their taxes (taxpayers who do not itemize). It is calculated by subtracting the amount of the donation from your gross income. It is an “above the line” adjustment to income that will reduce your AGI, and thereby reduce taxable income.
To qualify, you would have to give a donation to a qualified charity. If you have already made your donation after January 1, 2020, that contribution counts toward the $300 cap. A donation to a donor-advised fund (DAF) does not qualify for this new deduction.
New Charitable Deduction Limits: Also part of the bill, individuals and corporations that itemize with AGI’s over $2 million can deduct much greater amounts of their contributions.
Individuals can elect to deduct cash contributions, up to 100% of their 2020 adjusted gross income, on itemized 2020 tax returns. This is up from the previous limit of 60%.
Corporations may deduct up to 25% of taxable income, up from the previous limit of 10%.
The new deduction is only for cash gifts that go to a public charity. The old deduction rules apply to gifts to private foundations. You will not get the higher deduction for donating cash to your DAF. These new limits do not apply to gifts of appreciated stock.
For more information on how you can make a difference or if you need help in setting this up, contact Mary Foley in the parish office 434-792-9456 or firstname.lastname@example.org