CARES Act Charitable Giving Provisions

Watch “Getting Maximum Value From the CARES Act”, a webinar hosted by Cru Foundation. Of course, you will also need to talk with your tax advisor to see how the provisions apply to you personally, but they show how giving can make a huge impact during this unprecedented time. You will also see how you can leverage potential tax savings available this year.

Possible Unprecedented Benefits to Cru Ministry Partners

There are generous provisions in the CARES Act to promote increased charitable giving in 2020. Some of these provisions could potentially provide substantial opportunities for tax savings or increased giving for Cru ministry partners.

When considering this, it is important to remember that Cru and its employees do not provide tax or legal advice. As with all decisions involving legal or tax matters, ministry partners should consult an attorney or qualified tax professional about their particular situation.

The CARES (Coronavirus Aid, Relief and Economic Security) Act was signed by President Trump on March 27, 2020, to help provide financial stability and relief for individuals and businesses affected by COVID-19.

Below is information on enhanced benefits in the CARES Act for charitable gifts as well as certain favorable changes to withdrawals from retirement accounts that may impact a person’s charitable giving.

Three important changes related to charitable giving in 2020:

1. An above-the-line deduction up to $300 for cash contributions to charities. Donors are eligible for this benefit even if they do not itemize deductions. The contribution(s) must be made in cash to a church or other 501(c)(3) religious charity such as Cru, or other public charity. The provision does not apply to cash gifts to donor-advised funds, supporting organizations or private foundations. Contributions carried over from a prior year and applied to 2020 are not eligible. This provision is beneficial for those individual taxpayers who do not itemize deductions on their tax returns.

2. Cash gifts are now deductible up to 100% of Adjusted Gross Income (AGI) for individuals. For individuals and married couples who itemize their deductions for charitable giving, the 60% of AGI limit is increased to 100% for certain gifts of cash in 2020. These increases in the charitable contribution limits apply only to cash gifts made to a church or other 501(c)(3) religious charity such as Cru, or other public charity, in 2020. Also, a donor must elect on his or her tax return to have this increased AGI limitation apply. The increased deductibility provision does not include non-cash gifts or cash gifts to donor-advised funds, supporting organizations, or private foundations. Cash gifts can still be made to donor-advised funds, supporting organizations or private foundations subject to AGI limitations in place prior to the CARES Act (see below).

3. Required Minimum Distributions (RMD) in 2020 waived for most retirees. RMD from traditional IRAs, defined benefit pension plans, and 457 plans for individuals over age 72 are suspended until 2021. Those age 70 ½ or older may still make so-called Qualified Charitable Distributions directly to charity in 2020.

Additional Opportunities for Ministry Partners

  1. Possible to Eliminate Federal Taxes in 2020? It appears possible for an individual taxpayer to eliminate federal tax on ordinary income this year by making sufficiently large cash
    charitable contributions to those charities identified in the CARES Act (i.e., a church or other religious charity or a public charity). In addition, it may be possible to take distributions from retirement accounts and eliminate the federal income tax due on these withdrawn funds by giving the distributions to a church or other 501(c)(3) religious charity like Cru or other public charity (see details below).

    There are at least two creative giving strategies that qualify for this increased cash gift deduction:

  • Charitable Gift Annuity (CGA). A CGA does two things: creates lifetime income for the donor, and makes a generous gift to support ministry. This dual-purpose gift may be good for donors who want to make a gift to a charity, while at the same time providing the donors with a lifetime income source. The CARES Act creates a potential unprecedented opportunity for donors to make a generous gift to a qualified charity in 2020 using a CGA, enabling the donor to hedge against future economic volatility by retaining a lifetime income source and receive a tax deduction on the deductible portion of the cash gift up to 100% of AGI.
    Click here for more information on establishing a CGA.
  • Accelerate Cru giving through a Endurance Fund. Donors who anticipate making substantial gifts to Cru for the next several years, can front-load that giving in 2020 to take advantage of the increased AGI limitation and save taxes. This is possible through the use of a Endurance Fund at Cru Foundation. A large cash donation can be given to a Endurance Fund in 2020 and then that pool of funds can be allocated to the Cru ministries or missionaries of their choice in strategic amounts and at suitable times. By accelerating anticipated future giving into 2020, a donor could plan differently for potentially lower AGI limitations in future years. Another advantage of the Endurance Fund is that those funds will be invested and any growth in assets will also be available to be directed to the Cru designation of a donor’s choice.

2. Retirement account strategies. Ministry partners who are not subject to the early withdrawal penalties (generally before age 59 1/2), or who qualify for the elimination of the early withdrawal penalty in the CARES Act (see the section below on provisions for individuals impacted by COVID-19), may be able to withdraw cash from their retirement accounts penalty-free. In 2020, if the individual then gives this cash to a church or 501(c)(3) religious charity such as Cru, or other public charity, it is possible to offset 100% of the federal income taxes due on such retirement account withdrawals.

One other thing to note, for years prior to 2020, the only way to transfer a large IRA balance to a charity without having a federal tax liability was at death by using a beneficiary designation (of course, an eligible individual could use a QCD to transfer a portion of a large IRA balance).

Cru Foundation provides information and assistance related to estate design and gift planning. Communications with our staff are not intended as, nor should they be construed to be, legal or tax advice and are offered for educational purposes only. You should seek legal and/or tax advice from your professional advisors prior to making any planned gift.