CARES Act charitable provisions extended into 2021 (but not beyond)
Dec 29, 2020
UPDATE for 2022: The charitable provisions of the CARES Act have not been extended into 2022. This means that the limitation for cash contributions to certain charities has reverted to 60% of an individual's adjusted gross income (AGI). The above-the-line deduction for non-itemizers also expired at the end of 2021.
On December 27, 2020, the U.S. Government enacted a second stimulus package in response to the COVID-19 pandemic, attaching it to a year-end spending bill. The new stimulus package extends many of the charitable giving provisions outlined in the original Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law in late March of 2020. As in the CARES Act, some of the charitable giving provisions specifically exclude contributions to donor-advised funds.
For those who itemize their deductions:
Donors who itemize their deductions can now give more cash 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 both 2020 and 2021. 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 or 2021 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 stimulus package extends through 2021 the CARES Act's allowance for up to $300 of a taxpayer's charitable contributions to qualify as an above-the-line deduction. It increases the amount to $600 for married couples filing joint returns. This means you don't have to itemize deductions in order to claim the $300 (or $600) 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.
Nonprofit organizations with fewer than 500 employees may be eligible for loans under the second installment of the Paycheck Protection Program (PPP). The program is open to both nonprofits that previously received PPP support and those that have not yet done so. Previous recipients will only be able to apply for the second round of loans if they have fewer than 300 employees and can demonstrate that they experienced a 25% reduction in gross receipts during one quarter in 2020 compared with the same quarter in 2019.
The costs eligible for loan forgiveness include payroll, rent, utilities, and some interest payments; 60% of the loan proceeds must be spent on payroll to receive full forgiveness and the other 40% may be used on other eligible costs. The new stimulus bill now also includes as eligible costs expenses for certain personal protective equipment and other worker safety supplies. For information on how to apply, check the following site for updates: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program. (Note: The Small Business Administration must provide guidelines within ten days of the bill's being signed into law, which occurred on December 27, 2020.)