New Tax Incentive for Donations to the Y
On Friday, March 27, the current administration passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion economic stimulus package legislated to provide immediate relief for nonprofit. The CARES Act aims to help charities, like the YMCA of Snohomish County, who are facing economic hardship during the coronavirus pandemic.
Here are a few key provisions and incentives of the CARES Act that may affect you and your philanthropic goals:
New Deduction Available: The CARES Act allows taxpayers to take a federal charitable deduction of up to $300 per taxpayer ($600 for a married couple) in annual charitable donations. This is available only to people who take the standard deduction (for taxpayers who do not itemize their deductions). It is an adjustment to income that will reduce a donor’s adjusted gross income (AGI), and thereby reduce taxable income. A donation to a donor advised fund (DAF) does not qualify for this new deduction.
For those individuals who do itemize their deductions, the new law allows for cash contributions to qualified, public charities such as the YMCA of Snohomish County to be deducted up to 100% of your adjusted gross income for the 2020 calendar year. Corporations may deduct up to 25% of taxable income, up from the previous limit of 10%.
These new deductions do not apply to donations made to private foundations or donor advised funds.
Required Minimum Distributions Suspended: The new act temporarily suspends the requirements for required minimum distributions (RMD) for the 2020 tax year. This probably comes as a relief to many of you who would have had to withdraw from your retirement accounts. Many of our donors use their RMD to make a gift from their IRA. Despite the RMD suspension, remember that if you are 70½ or older, you can still make a gift from your IRA or name the YMCA of the Triangle as a beneficiary.
Why should I make a gift from my IRA?
- Your gift will be put to use today, allowing you to see the difference your donation is making.
- You pay no income taxes on the gift. The transfer generates neither taxable income nor a tax deduction, so you benefit even if you do not itemize your deductions.
- Since the gift doesn’t count as income, it can reduce your annual income level. This may help lower your Medicare premiums and decrease the amount of Social Security that is subject to tax.
Your Philanthropic Goals
We are deeply grateful for your continued kindness and compassion toward community during these challenging and uncertain times. If you are considering a gift to the YMCA of Snohomish County, we invite you to donate online. You can also contact Jennifer Willows, SVP & Chief Development Officer, via email to discuss your philanthropic goals and how your gift can support our COVID response and further our mission.
This information is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. References to tax rates include federal taxes only and are subject to change. State law may further impact your individual results.