Planned Giving

A Philanthropic Newsletter for Albertus Magnus High School

How the New CARES Act May Affect Your Gift Planning

Legislation known as the CARES ACT designed to rescue the economy from the effects of the coronavirus pandemic, was passed by Congress and signed into law by the president on March 27, 2020. The Act, officially named the Coronavirus Aid, Relief, and Economic Security Act, not only funds various health care needs but also provides financial relief for businesses, individuals, and institutions hit hard by the pandemic.

In recognition of the fact that charities' fundraising efforts are impeded at the very time there is a tremendous need for their services, the legislation contains certain provisions beneficial to donors. Other provisions, while not directly applicable to charities, provide some gift-planning opportunities. To keep you informed and assist you in planning during this unusual and difficult year, this newsletter summarizes these various provisions - all of which are effective for the year 2020.

  • New Charitable Deduction Available for Non-Itemizers 
  • Waiver of Retirement-Plan Penalties for Purposes Related to the Coronavirus 
  • Charitable Deduction Limits Modified for Individuals 
  • Increased Charitable Deduction Limits for Corporations 
  • Required Minimum Distributions Waived
Contact Us and Your Advisors
The CARES Act is several hundred pages long and includes numerous provisions that could benefit you financially. Consult your advisors about these provisions, and contact us if we can help you with any gift-planning opportunities.

New Charitable Deduction Available for Non-Itemizers

Under the CARES Act, taxpayers who do not itemize their deductions will be able to claim a charitable deduction of up to $300 for cash donations made in 2020. This means that you could add an additional $300 to your charity budget this year, recover a portion of it in tax savings, and help charities address extraordinary current needs.

Example: Suppose that you are over the age of 65 and your itemized deductions would total $12,000. You would claim the standard deduction of $13,700 rather than itemizing. If you give at least $300 in cash to qualifying charities this year, you can elect the standard deduction of $13,700 and also deduct $300 - for total deductions of $14,000.

Charitable Deduction Limits Modified for Individuals

If you made a large cash gift in 2019, you could deduct it only to the extent of 60% of your adjusted gross income. This year, the CARES ACT allows you to deduct it to the extent of your entire adjusted gross income.

Example: Suppose you had income of $300,000 in 2019, but from cash investments you made a cash gift of $500,000. Your previous deduction limit would have been $180,000 (60% of $300,000). In 2020, you can deduct $300,000. In both cases, the unused amount of the deduction could be carried forward and used to the extent of the limitation applicable to the carryover year.

Planning Pointer 1: Like the $300 deduction for non-itemizers, the modification of the contribution limit does not apply in the case of gifts for donor-advised funds and supporting organizations. The gifts in most cases must be to public charities like ours.

Planning Pointer 2: In the event you have made a multi-year pledge to a charity, you might want to accelerate payment of the pledge balance in 2020 if you can afford to do so. The charity would have the use of the money sooner - and you could use the deduction more quickly.

Waiver of Retirement-Plan Penalties for Purposes Related to the Coronavirus

If you are under the age of 59½ and withdraw money from your retirement plan to cover expenses incurred by you or a family member related to treatment of the coronavirus, the 10% tax penalty will not apply, taxation of the distribution can be spread over three years, and you can add the amount you withdraw to the fund later without regard to contribution limits.

This does not affect charities in the near term, but it does allow retirement funds to be used for an immediate need while enabling retirement accounts to recover and be used in the future for family security or charitable purposes.

Required Minimum Distributions Waived

Under the Secure ACT that was enacted this past December, IRA owners and certain participants in qualified retirement plans are required to take distributions beginning at the age of 72. The mandatory beginning age had been 70½. Under the CARES ACT, for the year 2020 there will be no mandatory distributions - no matter the age of the account owner.

Many people have seen a precipitous drop in the balances of their retirement funds, and this provision allows those accounts to recover before forcing the liquidation of possibly depressed securities they may hold in order to make required distributions.

The minimum age for making a tax-free transfer from an IRA to a charity remains at 70½, and the annual limit for such transfers remains at $100,000. However, because of the modification of deduction limits in 2020, one could exceed this limit.

Example: A donor over the age of 59½ with a large IRA balance not needed for living expenses wants to give more of that IRA now but do so without paying taxes. In 2020, the donor withdraws $500,000 from the IRA and then contributes it to charity. This adds $500,000 to adjusted gross income, but the donor can deduct the entire $500,000 since charitable gifts in 2020 are deductible to the full extent of adjusted gross income. The deduction offsets the taxable income, which is the equivalent of a tax-free charitable rollover.

Your situation might be quite different. Maybe you want to make a gift from your IRA in the future but not now because it has lost quite a bit of its value. Thus you elect to make no withdrawals this year, let the account recover, and either next year or in the year you attain the age of 72 make charitable transfers to count towards your mandatory distribution requirements.

We Are Here for You in These Uncertain Times

First and foremost, we want you to know that we are here for you during these unsettling times.

Most of the donors to Albertus Magnus are affected by these uncertain times, and you may be wondering about the impact on the gifts you have arranged or may be considering.

If you have questions regarding any fund you have established or might be contemplating in support of our mission or about any gift plan that pays income to you, please contact us. We are ready to help you and provide whatever information you seek.

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  • Photo of Una Miller

    Mrs. Una Miller 

    Director Development
    (845) 623-8842 x229
Albertus Magnus High School
798 Route 304
Bardonia, NY 10954
(845) 623-8842
Fax: (845) 623-0009
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