Like you, Caltech is adapting and changing in response to the COVID-19 pandemic. We continue to learn and to adjust, and we are sure that you do, too. Caltech is grateful for your generous support of our work over the years. As we adapt to our new reality, we would like to bring to your attention new tax incentives for charitable giving that were included in the recently enacted Coronavirus Aid, Relief, and Economic Security Act, or CARES Act.
Donors may deduct 100% of cash contributions to most public charities. For the 2020 tax year only, you may deduct cash contributions to Caltech and most other public charities up to 100% of your adjusted gross income (AGI). Ordinarily these deductions would be limited to 60% of your adjusted gross income. This higher limit will allow especially generous donors to reduce their 2020 federal income tax to zero. Donors who are even more generous can carry forward unused cash contribution deductions up to five years. Contributions to donor advised funds or supporting organizations are not eligible for this special election. Also note that the 100% limit is reduced dollar-for-dollar by other itemized charitable deductions, which means that your charitable deductions in 2020 cannot exceed 100%, but you may be able to carry unused charitable deductions forward to future years.
The 100% election may not always be the tax-wise choice. Because federal income tax rates are progressive, it is not a given that it will be to your advantage to deduct 100% of your cash contributions in 2020. Check with your financial or other advisors to determine whether the 100% election makes sense for your specific circumstances.
Non-itemizers are eligible for a special $300 charitable contribution deduction in 2020. If you do not itemize your deductions in 2020, you can still reduce your taxable income by up to $300 for contributions of cash to public charities.
Required minimum distributions from retirement plans are waived for 2020. Most required minimum distributions from retirement plans have been eliminated for 2020. Check with your financial advisor to see how this temporary rule will apply to you. Minimum distributions that have already started are still required from some defined benefit pension plans, but some required minimum distributions that would have started in 2020 may not have to start until 2021.
Qualified charitable distributions are still a great way for donors age 70½ or older to make contributions. If you are 70½ or older, a qualified charitable distribution (“QCD” or “IRA charitable rollover”) allows you to contribute up to $100,000 to Caltech from your IRA without paying income tax. Although the usual benefit of counting toward your required minimum distribution has been waived for 2020, a qualified charitable distribution remains a great way for donors to make tax advantageous contributions, especially donors who do not itemize their deductions.
The CARES Act, which was necessary to address the far-reaching effects of the COVID19 pandemic, provides additional tax incentives to encourage charitable giving. You have important priorities for your family and loved ones, and we know that their health and financial well-being comes first. When you are ready, we will be here to help you shape a charitable gift plan that suits your needs and allows you to keep helping with our important work. Please contact the Office of Gift Planning at email@example.com or call (626) 395-2927 to learn about the many ways you can support Caltech.