Highlights of the  Coronavirus Aid, Relief, and Economic Security Act -- THE CARES ACT.

  • You may deduct gifts of cash to most public charities to offset as much as 100% of your income
  • Why it might not be the tax-wise choice to deduct up to 100% of your income
  • If you don’t itemize you may reduce your taxable income by $300 for your charitable contributions in 2020
  • Required minimum distributions from retirement plans are waived for 2020

You may deduct gifts of cash to most public charities to offset as much as 100% of your income!

For the 2020 tax year only, you may deduct cash contributions to Navian Hawaii to offset up to 100% of your income. Ordinarily, the income tax charitable deduction for cash gifts is limited to 60% of your income. This 100% limit allows especially generous donors to reduce their 2020 federal income tax to zero. If you are even more generous you can carry forward unused cash contribution deductions for up to five years.

It may not be the tax-wise choice to deduct up to 100% of your income.

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% deduction makes sense for your specific circumstances.

If you don’t itemize you may reduce your taxable income by $300 for your charitable contributions 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 using an “above the line” adjustment to reduce your taxable income even if you don’t itemize.

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.


Setting Every Community Up for Retirement Enhancement Act -- THE SECURE ACT

The SECURE Act became effective on January 1, 2020 changed the rules governing retirement plans, including several provisions relevant to making gifts via a charitable IRA rollover (a Qualified Charitable Distribution or QCD.)

The SECURE Act increased the age at which you must start taking required minimum distributions (RMDs) from 70½ to 72. If you have not reached age 72 and aren’t required to take your RMD there are still reasons to consider a QCD at 70½. First, increases in the standard deduction mean far fewer taxpayers are able to itemize their income tax charitable deductions. If you don’t itemize, a QCD offers all the benefits of an income tax charitable deduction. You can’t claim a deduction for your QCD, but your QCD is not included in your income. The QCD is a tax-free gift.

Another reason to consider a QCD at 70½ is to reduce the balance in your IRA. At age 72 or older your RMD is based on the balance in your IRA at the end of each year multiplied times a factor published by the IRS. You may be in a position where you don’t want or need the income from your IRA. Higher income can increase Medicare premiums and other tax issues. Consider making QCDs beginning at 70½ to reduce the balance in your IRA. Please consult your IRA administrator’s website for a form to initiate an IRA charitable rollover (QCD).

The SECURE Act has changed rules that may affect aspects of your financial plans. As always, please talk with your advisor to discuss whether this gift option might work for you.

Please contact us at (808) 791-8084 or email development@navianhawaii.org.