December is often celebrated as a time of giving. During the holidays, we are often excited about giving gifts to those we love and appreciate. We also have the opportunity to expand our giving circle by giving to nonprofits and charitable organizations in our community, especially on Giving Tuesday. This time of good cheer is “the most wonderful time of the year,” so I encourage you to spread that cheer throughout the community in whatever way you can.
As estate planning attorneys, we ask you to consider who you would like to give your assets to when you die. As they say, you can’t take your possessions with you when you go! As a result, we are thoughtful about how to disseminate the treasures that we have taken a lifetime to acquire.
Taking that into consideration, COVID-19 has affected our lives, assets and how we are able to give. The financial impact on so many who have had their work hours reduced, lost jobs or businesses is real. There is a great need to give to and support those who have less. Those who give their time through service have had to be more thoughtful as we work to remain safe and keep our families safe. We must be thoughtful and sacrificial in decision making about how and with whom we spend our time. The contactless support requires constant vigilance. However, service opportunities remain available. I have had the privilege to serve by passing out food through our Kingdom Cares ministry as people pop open their trunks for us to “contactlessly” deposit their food.
Due to the Tax Cuts and Jobs Act of 2017 (TCJA), fewer taxpayers were able to itemize and receive a tax benefit from their charitable contributions because of the increased standard deduction. As a result, some donors lowered the amount of their contributions. The Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act, re-incentivizes giving especially in a time of uncertainty. The CARES Act re-incentivizes charitable giving by creating a $300 above-the-line deduction for qualified charitable contributions. This deduction is available to all taxpayers that take the standard deduction on their 2020 return.
This deduction is currently only available for 2020 contributions but could be changed by future legislation. To qualify, the donations must be in cash, not stock or donations of clothing or other property, and must be made directly to a qualifying charity, not certain private foundations or donor-advised funds.
Under the TCJA, individuals that itemize are allowed a deduction for cash contributions to certain charitable organizations of up to 60% of their adjusted gross income (AGI). If the amount of the individual’s contributions is greater than the 60% limit, the excess is carried forward and treated as a deductible contribution for the next five years.
The CARES Act temporarily modifies the contribution limits and allows individuals that itemize to deduct qualified charitable contributions up to 100% of their AGI. The excess contributions will be carried forward for the next five years. These changes only apply to cash contributions made to a 50% charity, excluding supporting organizations and donor-advised funds. Stock donations and gifts to private foundations are still subject to the 30% of AGI rule.