AN OPPORTUNITY TO ACCELERATE RESEARCH
The 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act offers once-in-a-lifetime opportunities to make transformative philanthropic gifts with significant tax benefits to you and your family. We put together this page as a resource for you and your family as you consider how you might be able to leverage this opportunity for your charitable goals.
Watch our August 10th webinar featuring an overview of the CARES Act and why this act and other circumstances in 2020 make it a unique year to benefit your family and achieve your philanthropic goals with strategic planning. The webinar is presented by LJI’s Planned Giving Advisory Council Co-Chair, John Kraemer, CSPG (Partner, WealthPoint, LLC):
Here is a summary of a few key provisions of the CARES Act that may affect you and your charitable goals:
NEW TAX INCENTIVES
- • The CARES Act expands charitable giving incentives and allows taxpayers who take the standard deduction to make up to $300 of charitable contributions to qualified charities in 2020. You might think that this is a small amount and would not make a difference. But what if all of our donors gave “just” $300? Such support would have a huge impact on catalyzing our research at a time when breakthroughs are needed today.
- • For those who do itemize their deductions, the new law allows for cash contributions to qualified charities such as the La Jolla Institute to be deducted up to 100% of your adjusted gross income for the 2020 calendar year. This could be a good reason to also consider accelerating your pledge payment schedule if you have a multi-year pledge.
- • Qualifying cash gifts by partnerships and S-Corps are also eligible.
- • The limit for gifts from C-corps increased from 10% to 25%, so if you own your own business it could be a good strategy to leverage corporate giving to enhance your personal philanthropic goals.
- • NOTE: Gifts to private non-operating foundations, supporting organizations, and donor-advised funds do not qualify under the CARES Act provision for 100% AGI limitations and are subject to standard AGI deductibility limits.
REQUIRED MINIMUM DISTRIBUTIONS SUSPENDED
The new law temporarily suspends the requirements for required minimum distributions (RMD) for the 2020 tax year. This probably comes as a relief to many of you who would have had to withdraw from your retirement accounts. If you already took your RMD earlier, you have an opportunity to put it back before August 31, 2020. Speak to your advisor to learn more about this option.
A GIFT FROM YOUR IRA MAY STILL BE A GOOD IDEA
Donors age 70½ or older may use their RMD to make a gift from their IRA through a qualified charitable distribution (QCD) directly to a 501(c)3 charity (the limit is $100,000). Despite the RMD suspension, there are still several reasons you might consider using your IRA to support La Jolla Institute:
- • You pay no income taxes on the gift of a QCD. The transfer generates neither taxable income nor a tax deduction, so you benefit even if you do not itemize your deductions. And your gift will be put to use today, allowing you to see the difference your donation is making at LJI.
- • Since a QCD doesn’t count as income, it can reduce your taxable income level. This may help lower your Medicare premiums and decrease the amount of Social Security that is subject to tax.
- • You could name La Jolla Institute or a Charitable Remainder Trust as a beneficiary of your IRA.
- • Consider converting your IRA to a Roth IRA. The tax consequences for converting a large IRA to a Roth IRA can be offset when paired with charitable gifts. Your family will benefit from tax-free distributions from the Roth Conversion in the future, while you make a difference to human health today.
CHARITABLE LEAD ANNUITY TRUST
You can create and fund a Charitable Lead Annuity Trust (CLAT), creating a multi-year commitment, providing annual support for LJI while providing future benefits to your heirs. A CLAT makes an annual payment to charity per a fixed schedule, much like a pledge. After the trust terminates, remaining assets are distributed to beneficiaries or a trust for their benefit. The tax facts:
- • Interest rates in 2020 are at a historic low (0.4%) which increases the gift tax deduction.
- • The present value of the remainder interest going to your beneficiaries is a taxable gift.
- • The present value of the income stream to charity is available as an income-tax charitable deduction. The deduction and tax savings can be taken in year one, or spread over the life of the CLAT.
- • Growth of assets that exceed the assumed 0.4% return, will pass to your family free of the gift tax.
NET OPERATING LOSS CARRYBACKS
There is a special window for Net Operating Loss Carrybacks for 2018, 2019 or 2020. Losses can be carried back five years to create immediate tax refunds – creating a source of funds to support LJI’s research. Gifts of tax refunds made in 2020 will create additional tax deductions, opening the ability to pair tax deductions with Roth Conversions and/or the sale of appreciated assets. These opportunities can benefit you and your family while creating the funds to fuel LJI’s valuable work.
YOUR CHARITABLE GOALS
The CARES Act offers a unique chance to make transformative philanthropic gifts with significant tax benefits to you and your family by relaxing some of the limitations on charitable income tax deductions for individuals and corporations. But these favorable provisions expire at the end of 2020. Please consider engaging your advisors in these discussions well before year-end.
If you have questions about any of the topics above or would like to discuss how your gift can help accelerate research, please don’t hesitate to contact Chief Advancement Officer Christopher Lee, at email@example.com or 858-752-6674.
Please note, this page is informational and educational in nature. It is not offering professional tax, legal, or accounting advice. For specific advice about the effect of any planning concept on your tax or financial situation or with your estate, please consult a qualified professional advisor.