The Coronavirus Aid, Relief, and Economic Security (CARES) Act Incentives for Donors Update

November 4, 2020

In 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act contains significant incentives for donors to support the causes and organizations they care about. Most significantly, for taxpayers who do not itemize, the Act provides all taxpayers with an “above-the-line” charitable income tax deduction for contributions up to $300. This may be a one-time gift of $300 or multiple charitable contributions totaling $300. This provision is an important step in enabling all community members to participate in philanthropy. Individual taxpayers who do itemize can deduct up to 100% of their adjusted gross income (AGI) (UP FROM 60%) for cash contributions to public charities, including The Denver Foundation. Both of these provisions are limited to the 2020 tax year, apply only to cash gifts (not those of appreciated securities), and do not include gifts to Donor-Advised Funds, private foundations, or supporting organizations.

Ways to take advantage of these unique tax incentives

  1. Cash contributions of any amount to our rapid-response grantmaking funds, including the Critical Needs Fund to address the COVID-19 crisis, the Black Resilience in Colorado Fund, and the Fund for Denver.
  2. A variety of fund types including Donor Advised Funds, Field of Interest Fund, Endowments, and Designated Funds to support some of your favorite organizations and causes on an annual, sustainable basis.
  3. Establishing a Scholarship Fund to support students and schools at a critical time.

Ways to accomplish your goal within the cash contribution restriction

  1. A donor might use appreciated securities to fund their donor-advised fund, avoiding capital gains tax and securing an income-tax deduction of up to 30% of AGI. With a recovery of over 50% since the late-March lows for the S&P 500, many securities bought over the past decade still have high valuations and embedded gains.
  2. Donors over the age of 70 1/2 can use their Qualified Charitable Distribution (QCD) from an IRA to contribute up to $100,000 IN IRA assets directly to various funds and programs at the Foundation, without incurring taxable income from the distribution.
  3. Families interested in creating a legacy at the Foundation may consider taking advantage of the 100% deduction for cash contributions and “bunching” several years worth of donations into 2020 to establish an endowed fund.