How does the CARES Act affect your giving?

May 06, 2020

 

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law in late March. The $2.2 trillion bill was designed to respond on many fronts to the COVID-19 crisis. It includes provisions related to charitable giving, although some of those provisions specifically exclude contributions to donor-advised funds. 

 

For those who itemize their deductions:

 

Donors who itemize their deductions can now give more to charity before reaching their adjusted gross income (AGI) limitation. Formerly set at 60%, the limitation for cash contributions to certain public charities has now been raised to 100% of an individual’s AGI for 2020. Any giving beyond this 100% limitation may be carried over and used in the next five years.
 

This provision excludes giving to private nonoperating foundations and supporting organizations, along with any contributions made to establish or maintain donor-advised funds (DAFs) like those held at Vanguard Charitable.
 

This means that Vanguard Charitable donors who exhaust the 60% limit with cash contributions to their DAFs in 2020 could make any additional donations outside their DAF and have those donations qualify for a deduction (up until reaching the 100% limit). Please consult a tax advisor to discuss your specific circumstances.

 

For those who don’t itemize their deductions:

The CARES Act allows for up to $300 in charitable contributions to qualify as an above-the-line deduction, meaning you don’t have to itemize deductions in order to claim the $300 as a deduction. Qualifying donations must be made in cash or cash equivalents (as opposed to stock, for example) and cannot be directed to supporting organizations or DAFs.

For nonprofits:

501(c)(3) or 501(c)(19) nonprofits with 500 or fewer employees may be eligible for loans of up to $10 million (and expedited loans of up to $1 million) as part of the Paycheck Protection Program. Loan proceeds may be used to cover costs related to payroll, rent, utilities, and some interest payments. Loans may be fully forgiven if the receiving nonprofit does not lay off workers or reduce salaries for a period of eight weeks after receiving the loan. For information on how to apply, visit: https://independentsector.org/resource/caresact/.
 

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