As you may be aware, the U.S. Congress has passed the Coronavirus, Aid, Relief, and Economic Security (CARES) Act, that the president has signed into law. We have received numerous inquiries from our donors on how this impacts gifts to Central Michigan University and other causes. Below is some information that may help you as you consider the best way and the best time for your financial support.
New Gifting Opportunity for Non-Itemizers
- If you do not itemize deductions, you may nonetheless take an "above-the-line" deduction for up to $300 in cash gifts you make to Central Michigan University this year. The break is available to people who claim the standard deduction, which is $12,400 for singles or $24,800 for married-filing jointly in 2020. This provision was inserted specifically to encourage charitable giving this year.
"Unlimited" Deduction for Cash Gifts
- If you do itemize, you may deduct up to the entire amount of your adjusted gross income (AGI) for cash gifts you make in 2020, without reference to the 60 percent limitation that would otherwise apply. Gifts to donor-advised funds (DAFs) do not qualify. In 2020, a donor who deducts 30% of AGI in long-term appreciated property gifts and elects the 100% of AGI limit for qualified cash contributions will be able to also deduct up to 70% of AGI for qualified cash gifts, a total of up to 100% of AGI. If this donor uses all available deduction for qualified cash gifts, that donor will pay no federal income tax in 2020.
- The limitation on deductions for cash contributions by corporations has also been temporarily increased, from 10 percent of taxable income to 25 percent.
Relief from the Minimum Distribution Requirement
- The CARES Act impacts owners of Individual Retirement Accounts (IRAs) by providing a temporary waiver of Required Minimum Distributions (RMDs) for 2020, allowing IRA owners of age 72 and older to keep funds in their IRAs and other qualified retirement plans. The decreased value of their portfolios may motivate some people to keep funds in their accounts temporarily, waiting to see what happens in the investment markets. You may still make direct distributions to Central Michigan University from your IRA, just as before if it makes financial sense for you to do so.
"Charitable IRA" Rules Unchanged
- The minimum age for making a qualified charitable distribution (QCD) from your IRA – the so-called "charitable IRA Rollover" – is still 70 ½ and the amount limit is still $100,000. The QCD is still available for 2020 even though RMDs have been suspended. Or you can take distributions from your IRA and make deductible gifts in 2020, with no AGI limitation.
Transferring Assets into a Secure Income Stream
- The new law, coupled with current financial uncertainty, has created an appealing climate for those concerned about their income from investments. Please let me know if you would like to learn more about how you can transfer assets (cash, securities, real estate, etc.) into a secure income stream for yourself or others.
Low Lending Rates Make Gift Plan Appealing for Estate Planning
- Recent steps taken by the Federal Reserve Bank on federal lending rates have made certain charitable gift strategies more appealing than they have been in some time. Please let me know if you would like to learn more about how you can reduce the size of your taxable estate while planning for a transfer to heirs, all while making a sizeable gift to Central Michigan University.
The CARES Act is not overly complex; however, we encourage you to contact your financial advisor for more information and details.