Like you, Boys Ranch is adapting and changing in response to the COVID-19 pandemic and the accompanying economic uncertainty. We are grateful for your generous support of our work over the years. As we adapt to our new reality, we would like to bring to your attention new tax rules for charitable giving included in the recently enacted Coronavirus Aid, Relief, and Economic Security, or CARES Act.
For the 2020 tax year only, you may deduct cash contributions to Boys Ranch and most other public charities to offset up to 100% of your income. Ordinarily, the income tax charitable deduction for cash gifts is limited to 60% of your income. This 100% limit allows especially generous donors to reduce their 2020 federal income tax to zero. If you are even more generous, you can carry forward unused cash contribution deductions for up to five years. Contributions to donor advised funds or supporting organizations are not eligible for this deduction. Your ability to deduct up to 100% of your income with cash gifts is reduced by your gifts of appreciated assets such as publicly traded securities and real estate. That means your charitable deductions in 2020 cannot exceed 100% of your income, but you may be able to carry unused charitable deductions forward to future years.
Because federal income tax rates are progressive, it may not be to your advantage to deduct 100% of your cash contributions in 2020. Check with your financial or other advisors to determine if the 100% deduction makes sense for your specific circumstances.
If you do not itemize your deductions in 2020, you can still reduce your taxable income by up to $300 for contributions of cash to public charities using an “above the line” adjustment to reduce your taxable income.
Most required minimum distributions (“RMD”s) from retirement plans have been eliminated for 2020. Check with your financial advisor to see how this temporary rule will apply to you. Minimum distributions that have already started are still required from some defined benefit pension plans, but some RMDs that would have started in 2020 may not have to start until 2021.
If you are 70½ or older, a qualified charitable distribution (“QCD” or “IRA charitable rollover”) allows you to make a tax-free gift of up to $100,000 to Boys Ranch from your IRA. While the benefit of using a QCD to satisfy your RMD has been waived for 2020, a qualified charitable distribution remains a great way to make tax advantageous contributions, especially if you don’t itemize your deductions.
This article appeared in The Heritage, Vol. 22 Number 3, 2020.