Tax Benefits of the CARES Act

In 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Setting Every Community Up for Retirement Enhancement (SECURE) Act. These wide-reaching laws include new incentives and rules that may impact your decisions about charitable giving.

THE CARES ACT

  • Creates a new “above the line” charitable deduction: Under the new rule, taxpayers who do not itemize can make charitable cash contributions and benefit from a tax deduction. This deduction is restricted to $300 per tax-filing unit, including married tax payers filing jointly. This rule will continue beyond 2020.
  • Suspends the adjusted gross income (AGI) limitations on charitable giving deductions: Taxpayers who itemize now may make cash gifts to qualified charities and deduct up to 100% of their AGI (the previous limit was 60%). The new rule applies only to gifts of cash made in 2020 and excludes gifts made to donor-advised funds, private foundations, or split interest trusts like CRTs, PIFs, and CLTs.
  • Waives required minimum distributions (RMDs) from individual retirement accounts (IRAs): The new law suspends RMDs for the 2020 tax year, allowing individuals to retain more of their retirement assets. If you are age 70 1/2 or older, you can still make a tax-free gift to Randolph-Macon Academy directly from your IRA.

THE SECURE ACT

  • Extends the timeline to contribute to an IRA past the age of 70 1/2: Under this rule, individuals who work beyond age 70 1/2 can continue to grow their retirement accounts.
  • Changes the age at which individuals must start taking distributions from their IRAs: The law changes the age requirement for RMDs to 70 1/2 to 72 years old. It only applies to those who turned 70 1/2 in or after 2019. Under the CARES Act, there is no RMD requirement at any age in 2020 only.
  •  Eliminates the stretch IRA: Under the new law, if a non-spouse is named as the beneficiary of a retirement plan, that beneficiary may now have to withdraw the entire amount within 10 years. Previously beneficiaries could stretch withdrawals over their lifetime. Opportunity: Set up a testamentary charitable gift annuity or remainder trust, and name either Randolph-Macon Academy or the trust as the beneficiary of your retirement plan. These gift vehicles can provide lifetime payments to your designated loved ones and allow you to support the future of Randolph-Macon Academy.

We are so grateful for your generosity. Please contact Randolph-Macon Academy at (540) 636-5206 or at lmassett@rma.edu to discuss how your gift can support R-MA’s programs.