On December 27, 2020, President Trump signed into law an extension and expansion of the CARES Act which was passed earlier in 2020 to help ministries like Cru and partners like you. Here are the highlights of the new legislation:
- The waiver of deduction limits against AGI for cash contributions to qualified charities was extended for gifts made in 2021, meaning that donors may deduct cash gifts up to 100% of their 2021 income, minimizing their taxes and benefitting ministries (subject to their personal tax situation).
- The “above-the-line” deduction for non-itemizers was expanded to $600 per couple for gifts made in 2021.
- The increased charitable deduction limit of 25% for corporations was extended through 2021 for gifts of cash and food inventory.
Further details about the CARES Act and its benefits are covered in the article below which has been revised to reflect the provisions in effect for 2021.
Possible Unprecedented Benefits to Cru Ministry Partners
Originally published on July 1, 2020. Updated on February 19, 2021.
There are generous provisions in the CARES Act to promote increased charitable giving in 2021. 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. It was subsequently revised and extended into 2021.
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 still in effect through 2021:
- 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 2021. 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 2021. 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).
- An above-the-line deduction up to $600 per couple for cash contributions to charities for non-itemizers. Donors are eligible for this benefit even when 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 2021 are not eligible. This provision is beneficial for those individual taxpayers who do not itemize deductions on their tax returns.
- Required Minimum Distributions (RMD) which were waived in 2020 for most retirees, are now back in effect for 2021. The extension of the CARES Act for 2021 does not include the suspension of RMD from traditional IRAs, defined benefit pension plans, and 457 plans for individuals over age 72. Those age 70 ½ or older may still make Qualified Charitable Distributions directly to charity in 2021. Though a tax deduction is not permitted, the donor does not pay the applicable tax on the donation, which equates to significant tax savings for most people, the savings directly benefit the charity.
Additional Opportunities for Ministry Partners
- Possible to Eliminate Federal Taxes in 2021? 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 a stream of 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 2021 using a CGA, enabling the donor to retain 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 an Endurance Fund. Donors who anticipate making substantial gifts to Cru for the next several years, can front-load that giving in 2021 to take advantage of the increased AGI limitation and save taxes. This is possible through the use of an Endurance Fund at Cru Foundation. A large cash donation can be given to an Endurance Fund in 2021 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 in the future. By accelerating anticipated future Cru giving into 2021, a donor could plan 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.
- 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 2021, 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, naming Cru as the charitable beneficiary of your IRA is still a highly-impactful way to give.
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.