This year has not affected everyone the same, and most people are not in the financial position they assumed they would be when projecting from the beginning of this year. But for those who find themselves thriving, there may be an exciting opportunity to maximize your charitable giving in ways you never dreamed possible.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was passed into law. While the stimulus package got the most attention, a lesser-known provision may provide an opportunity for a number of people who find now is just the right time to give.
Under the CARES Act, you may be able to give and deduct up to 100 percent of your adjusted gross income (AGI) this year and eliminate (or significantly reduce) the amount of federal income taxes you have to pay.
Building toward 100 percent with your charitable gifts
While there are a number of options for what you can give, how you give them comes down to two ways: Cash only or cash plus assets. You can give up to 100 percent of your AGI in cash (60 percent under existing tax law and an additional 40 percent under the CARES Act law). Or you may choose to give a combination of cash and assets (up to 30 percent of your AGI in asset gifts – such as real estate or business interests) and the remaining 70 percent in cash (20 percent under existing law and the additional 50 percent under the CARES Act law).
It’s important to remember that the portion of the additional giving allowed under the CARES Act must be given to a church or public charity and not to a donor-advised fund (like your Giving Fund) or a private foundation. (If you’re interested in making a gift to an organization this year but would like to give the money over time, you may open a Single-Charity Fund and make payments on the schedule you choose.)
5 ways to get to 100 percent
To make the most of this unique opportunity, NCF givers are taking advantage of some creative options.
First 30 percent in asset gifts
- Business Interests: You can give a portion of your business to charity, whether you are about to sell it or intend to keep and continue to run it. Giving a portion of your business to charity allows income to flow into your Giving Fund and for you to have what you need to meet your giving goals.
- Real estate: If you own real property and are planning to sell it, you may be able to gift all or a portion of it to NCF, take a tax deduction for the fair-market value of the gift, and have money in your Giving Fund to give to your favorite causes. You may also be able to gift real estate to your Giving Fund while continuing to manage the property.
- Other appreciated assets: Some givers have valuable assets like oil, gas, or mineral rights, farmland, valuable jewelry, etc. If you have an asset, and you’re wondering if you can give it, now is a great time to ask.
Remaining 70 percent in cash
- Exercising stock options: If you have acquired stock options with your company, you probably know there is a lot of sophisticated strategy to exercising them. It’s important to time it just right, so you don’t have a lot of ordinary income recognition. This year, because of the unique opportunities offered by the CARES Act, you may be able to exercise those stock options, make a gift to charity and take a deduction in the amount of the gift up to 100 percent of your AGI.
- Retirement account withdrawals: If you are 72 and you must take required minimum deductions, you may choose to gift that money to your Giving Fund and take a deduction in the amount of the gift. If you are certain you have more than you need in your retirement account, you may take a cash withdrawal from it and make a gift to charity to offset the tax.
Remember that the giving allowed under existing tax law may be given to a donor-advised fund (Giving Fund) or a private foundation, as well as churches and charities. However, the additional cash giving provided for under the CARES Act must be given only to churches and charities or Single-Charity Funds.
However you choose to make your gifts, don’t miss the opportunity if you have something you’ve been waiting to give.