Changes to charitable giving rules for 2020.

• Author: McCartney, Dana L.

As clients look for last-minute tax-saving strategies in 2020, one area that should be considered involves the changes to the charitable giving rules made by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, RL. 116-136. Even taxpayers who do not itemize can benefit in 2020 from a charitable deduction.

Section 2204 of the CARES Act allows for an above-the-line deduction of up to $300 per taxpayer for a cash donation to a public charity (other than a donor-advised fund or supporting organization under Sec. 509(a)(3)). The $300 limit applies to the tax-filing unit, so for those who file married filing jointly, the maximum above-the-line deduction is $300.

For those who are over age 701/2, qualified charitable distributions from an IRA of up to $100,000 are still allowable in 2020. Even though required minimum distributions from IRAs were suspended for 2020, an eligible individual may make direct charitable donations from his or her IRA in 2020, and the direct charitable distribution of up to a maximum of $100,000 will not be included in income (the charitable donation will not be deductible). This rule applies regardless of whether the taxpayer itemizes. Though there is not a direct income tax savings in 2020 for making qualified charitable distributions, reducing the value of the IRA through charitable gifting may be a benefit to an overall estate plan for those with taxable estates who are also charitably minded.

For those who itemize, the potential benefits of charitable giving are even greater. Under the law known as the Tax Cuts and Jobs Act, P.L. 115-97, the rule that limits the charitable deduction to 50% of the donor's charitable contribution base increased to 60% for tax years beginning after Dec. 31, 2017, and before Jan. 1, 2026 (for cash contributions to public charities and private operating foundations). For 2020 only, this limit has been raised to 100% under Section 2205 of the CARES Act for qualified contributions (cash donations to a public charity that is not a donor-advised fund or a supporting organization that the taxpayer elects to treat as qualified contributions).

While the percentage limit has been temporarily increased to 100% for qualified contributions, taxpayers can make the qualified contribution election separately for each contribution and thus do not have to elect to treat all of their charitable contributions that would otherwise qualify as qualified contributions if they would not receive a tax...