CARES Act charitable giving impacts

As we slowly begin to look toward what recovery from the COVID-19 pandemic might look like, there are still many opportunities to support those in need.

In late December 2020, another stimulus package was signed into law to encourage immediate charitable giving to help combat the far-reaching impacts of COVID-19, extending some of the provisions of the Coronavirus Aid, Relief and Economic Security (CARES) Act.

A goal of the legislation is to get charitable dollars to the organizations serving the most vulnerable populations as quickly as possible. As such, there are some restrictions on the types of assets that qualify and the organizations that can be supported, set out below.

Whether you are a business or individual contemplating your charitable giving, an advisor guiding your clients, or a nonprofit organization in need of support or seeking to grow your endowment, consider how these provisions may impact or inspire philanthropy in 2021.

At the time of this publication, The Universal Giving Pandemic Response and Recovery Act, S. 618 and H.R. 1704, had been introduced in Congress by a bipartisan group of lawmakers. This proposed legislation further expands the current universal charitable deduction, increasing the cap on the temporary universal charitable deduction from $300/$600 to one-third of the standard deduction, roughly $4,000 for individuals and $8,000 for joint filers. It would also extend the availability of the deduction through 2022, and it would allow gifts to donor-advised funds, which are currently excluded. NCCF staff will continue to monitor any changes and provide updates as they arise.

For businesses

In 2021, corporations can deduct up to 25 percent of taxable income for cash gifts to qualified charitable organizations. This is an increase from 10 percent of taxable income prior to the CARES Act.

For individuals

Donors who do not itemize their charitable deductions can claim a tax benefit up to $300 for cash gifts made to public charities.

If you typically take the standard deduction on your tax returns, you may deduct an additional $300 over the amount of the standard deduction (individual) and up to $600 (married filing jointly) for cash gifts made to public charities.

Donors who itemize charitable deductions may deduct cash gifts to public charities to offset as much as 100% of your income in 2021.

Typically, the income tax charitable deduction for cash gifts is limited to 60% of your adjusted gross income (AGI). In 2021, especially generous donors may reduce their 2021 federal income tax to zero through cash gifts to public charities (subject to the exceptions below). If your assets are substantial enough that you can give more than your income this year, you won’t lose the deduction for the excess amount; you can carry forward any unused cash contribution deductions for up to five years.

Important caveats

These provisions only apply to cash gifts made to qualified public charities.

Gifts of non-cash assets such as stock and securities, real estate or others do not qualify.

Cash gifts must be made to qualified public charities -- including religious organizations, educational institutions, government entities for a public purpose and most publicly-supported charities. Excluded from these charitable giving incentives are gifts to donor advised funds, private foundations and charitable remainder trusts.

If you are working with the North Carolina Community Foundation and you’d like to take advantage of these charitable giving incentives, consider making a cash gift to your local NCCF affiliate’s endowment, your favorite nonprofit organization or their endowment (see our full list of funds here), establish a designated fund to provide annual support to your favorite nonprofit organization, or start a scholarship endowment to support education in North Carolina.