The CARES Act and Caring for Others in a Time of Crisis
o provide much-needed relief from the eects of the COVID-19 pandemic, the
President signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act
into law. While the Act primarily provides economic stimulus for businesses, there are
several temporary measures that impact planning and giving.
Easing the Financial Burden
Several measures in the CARES Act are designed to help ease the financial burden
on individuals.
Required minimum distributions suspended
The required minimum distribution (RMD) rules are waived for 2020 for certain
defined contribution plans and IRAsboth for 2020 RMDs and for 2019 RMDs that
needed to be taken by April 1, 2020. Those who already took their RMD early in 2020
may be able to return that withdrawal to the IRA or other qualified retirement plan
from which it was taken.
IRA contribution deadline extended
The deadline for making an IRA contribution that counts for 2019 (usually April 15) has
been extended to July 15, 2020, to match the extended tax filing deadline.
Penalty on early retirement distributions removed
An individual who needs to take a distribution from a qualified retirement account
for specified reasons related to COVID-19 may do so without paying the 10% early
withdrawal penalty. This applies to distributions up to $100,000 made at any time
during 2020. This distribution is taxable over three years and may also be paid back
within three years without regard to the cap on contributions.
In addition, for distributions or loans related to COVID-19:
The 20% mandatory income tax withholding on rollover distributions is waived
for 2020.
The maximum loan amount is doubled for loans between March 27 and
December 31, 2020, with the loan due date extended for one year.
Recovery payments for individuals are being processed
For many U.S. taxpayers, the Federal government will make direct payment up to
$1,200 each for individual taxpayers and $2,400 for married-filing-jointly taxpayers,
with additional payments of $500 per child under age 17. Taxpayers will see
reductions as adjusted gross income (AGI) climbs above $75,000 (individual) or
$150,000 (married filing jointly), with the rebate dropping to zero once AGI exceeds
$99,000 (individual) or $198,000 (married filing jointly).
Encouraging Charitable Support
Two specific measures in the CARES Act are designed to encourage giving in this time of crisis.
limit for gifts increased
For 2020, the individual limitation of 60% of AGI is raised to 100% of AGI for cash gifts to public
charities (not to donor-advised funds). Corporations also have higher limits for 2020 cash
gifts—25%, up from the usual 10% of AGI.
Above-the-line deduction allowed
To encourage charitable giving this year, the CARES act grants an individual who does not
itemize a $300 above-the-line income tax deduction for gifts to charitable organizations in
2020. Of course, donors who wish to itemize may still do so.
Examining Other Giving Options
While cash gifts receive added benefits under the CARES Act, there are other ways to give that
may be a better fit for your planning.
Donor-advised funds
Individuals with established donor-advised funds may be in a better position to give, as the
money has already been set aside and donations through the DAF will not aect personal
financial security.
Qualified charitable distributions
IRA owners over age 70½ can give up to $100,000 (annual aggregate amount) directly from
their IRA to charity. Although the gift does not qualify for a deduction, there is no tax on the
distribution. For some donors, this option may still be a good fit even though RMDs from an IRA
are not required in 2020.
Gift annuities
Donors who wish to secure a reliable stream of income during this uncertain market may find
value in charitable gift annuities.
Revocable gifts
Of course, another way to give without impacting current financial resources is to make a
revocable gift, such as a gift in a will or a charitable beneficiary designation on a life insurance
policy or retirement account.
Tax information provided herein is not intended as tax or legal advice and cannot be relied on to avoid statutory
penalties. Always check with your tax and financial advisors before implementing any gift.
Office of Gift Planning
Winthrop University
206 Tillman Hall
Rock Hill, SC 29732