By Jerry Love, LBF Director of Planned Giving
ALEXANDRIA, La. (LBM) – When Congress passed the CARES Act, it offered incentives to promote charitable giving that are being overlooked because of the emphasis given to the federal government’s $1,200 relief payments to taxpayers and Payroll Protection Program forgivable loans to small businesses and nonprofits, including churches.
But, the provisions relating to charitable giving are critically important to churches and other nonprofits because they encourage donors to give more.
$300 AGI DEDUCTION
For the 2020 tax year, filers may claim a $300 deduction for cash contributions to churches, ministry organization and other charitable organizations.
This applies only to those who take the standard deduction when filing their tax returns. Those who itemize their deductions are not able to claim additional amount. There is some question as to the term of the provision, but it likely applies only to 2020 filing year (returns filed in 2021).
The $300 deduction may seem like a relatively small amount, but it is an “above-the-line” deduction, meaning a taxpayer may subtract the amount from gross income to arrive at a lower “adjusted gross income” for the tax year.
LIMITS LOOSENED
Under normal tax rules, the deductible amount of cash contributions is limited to 60 percent of a person’s AGI (adjusted gross income).
However, the CARES Act temporarily increases the limit for 2020 so that donors may deduct cash gifts to charities up to an amount equal to 100 percent of their AGI.
There are other deduction limits on gifts such as stock, mutual funds, real estate and personal property. So, consult your tax advisor for details on possible changes in other limits.
Also, it is worth noting that the 5-year carryforward still applies to any amounts donated that exceed the deductible limits.
Jeff Steed, executive director of the Louisiana Baptist Foundation, said his ministry is thankful for these additional giving opportunities.
“These provisions will benefit churches and other ministries to help advance the Kingdom while benefiting Louisiana Baptist taxpayers,” he said.
IRA CHARITABLE ROLLOVER
Steed also reminded donors about a previous tax law provision that can be beneficial for donors and their churches during this difficult time.
“The IRA Charitable Rollover was enacted in 2006,” Steed told the Baptist Message. “And this tax law provision allows taxpayers who are 70 1/2 years old or older to make charitable contributions directly from their IRA accounts,” Steed said.
He explained that under the rollover provision distributions from traditional IRA’s can be made directly to the donor’s selected charitable organization (or multiple organizations) and not be included in the donor’s taxable income.
“This provision offers Louisiana Baptists the continued opportunity to make qualified charitable distributions (QCDs) directly from an IRA to a church or other ministries as God inspires,” Steed continued. “We have other gift opportunities to advise you about that will help you make your hard-earned life’s savings count now for the Kingdom and beyond your life.”
The Louisiana Baptist Foundation helps individuals to maximize gifts to Louisiana Baptist churches and ministries, and, works with Baptist churches, ministries and entities about financial management. The Foundation also advises Louisiana Baptists about tax code changes that impact charitable giving. For more information, visit www.LBFinfo.org, or call 1.877.523.4636.
