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Tax Benefits of the Cares Act

Tax Benefits of the Cares Act

The new CARES (Coronavirus Aid, Relief, and Economic Security) Act is designed to help you, businesses, and nonprofits facing economic hardship during the coronavirus pandemic.

Here are key provisions of the CARES Act that may affect you and your charitable goals:

New Tax Incentives

  1. $300 Above-the-Line Charitable Deduction

    The CARES Act expands charitable giving incentives and allows taxpayers who take the standard deduction to make up to $300 of charitable contributions to qualified charities this year. You might think that this is a small amount and would not make a difference. But what if all of our donors "just" gave $300? Such support would have a huge impact on those we serve.

    • A new above-the-line charitable deduction of up to $300 is available to taxpayers who do not itemize deductions.
    • This deduction applies only to qualified cash contributions and does not apply to cash contributions made to donor advised funds or supporting organizations. It also does not apply to carry-over contributions.
       

    Currently, it's unclear whether this deduction will be allowed beyond 2020.

  2. Charitable Contribution Limitation

    For individual taxpayers who do itemize deductions, the CARES Act temporarily suspends the 60% charitable contribution deduction limitation for qualified cash contributions.

    • Individual taxpayers who contribute cash to a public charity, or a limited number of private foundations, may deduct up to 100% of their adjusted gross income after taking into account other contributions subject to charitable contribution limitations.
    • Individual taxpayers can continue to carry forward any excess charitable contributions for five years.
       

    Corporations may deduct charitable gifts up to 25% of the corporation's taxable income (increased from 10%).

    This is only effective in 2020.

Required Minimum Distributions (RMD) Suspended

The new law temporarily suspends the requirements for required minimum distributions (RMD) for the 2020 tax year. This probably comes as a relief to many of you who would have had to withdraw from your retirement accounts. Many of our donors use their RMD to make a gift from their IRA. Despite the RMD suspension, remember that if you are 70 ½ or older, you can still make a gift from your IRA or name Otis College of Art and Design as a beneficiary.

Why a gift from your IRA may still be a good idea:

  • Your gift will be put to use today, allowing you to see the difference your donation is making.
  • You pay no income taxes on the gift. The transfer generates neither taxable income nor a tax deduction, so you benefit even if you do not itemize your deductions.
  • Since the gift doesn't count as income, it can reduce your annual income level.

This is only effective in 2020.

Your Charitable Goals

We are deeply grateful for your continued kindness and support during this difficult time. For more information about how the CARES Act may impact your specific financial situation, please consult with your tax, legal, or financial advisor(s).

Please contact Patrick J. Mahany, Vice President for Institutional Advancement at pmahany@otis.edu to discuss how your gift can help further our mission.

Information contained herein was accurate at the time of posting. The information on this website is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in any examples are for illustrative purposes only. References to tax rates include federal taxes only and are subject to change. State law may further impact your individual results.