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CARES Act Tax Benefit

CARES Act for Nonprofits – Friday, March 27, Congress passed and the President signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion economic stimulus package legislated to provide immediate relief for nonprofits.

The inclusion of an expanded charitable giving incentive is a critical acknowledgement by Congress of the importance of the work of nonprofits like Ballet Austin. Indeed, now more than ever the arts are needed to bring the community back together! It is the first time Congress has passed this type of giving incentive in response to disaster or national emergency and these benefits have been extended through 2021.

Charitable Giving Incentives

Up to $300 per taxpayer ($600 for a married couple) in annual charitable contributions. This is available only to people who take the standard deduction (for taxpayers who do not itemize their deductions). It is an “above the line” 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.

As part of the bill, individuals and corporations that itemize can deduct much greater amounts of their contributions. Individuals can elect to deduct donations up to 100% of their AGI (up from 60% previously). Corporations may deduct up to 25% of taxable income, up from the previous limit of 10%. The new deduction is for gifts that go to a public charity, such as Ballet Austin. The old deduction rules apply to gifts to private foundations.

NOTE:  The higher deduction does not apply to donations directly to a donor advised fund (DAF). Additionally, these new limits do not apply to gifts of appreciated stock.

For those who are over age 70½, qualified charitable distributions from an IRA of up to $100,000 are still allowable in 2021. An eligible individual may make direct charitable donations from his or her IRA in 2021, and the direct charitable distribution of up to a maximum of $100,000 can be counted toward satisfying your required minimum distributions (RMDs) and will not be included in income. QCDs don’t require you to itemize, which means you may decide to take advantage of the higher standard deduction, but still use a QCD for charitable giving.

This information is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in any examples are for illustrative purposes only. References to tax rates include federal taxes only and are subject to change. State law may further impact your individual results

For more information, please contact Ballet Austin Development Director, Christi Lotz, at christi.lotz@balletaustin.org.

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