CARES Act: 100% of AGI Limit on Charitable Contributions Explained

Bernie Kent, JD, CPA, PFS | April 13, 2020

In my article, “Giving More Than 60% Of Income To Charity? CARES Act Says Deduct It!” I describe the limits on charitable contributions as a percentage of Adjusted Gross Income (AGI) that apply to various types of charitable contributions. In the simplest case, you can take an income tax deduction in 2020 for cash contributions directly to the charity of up to 100% of your income. There are lower limits on other types of contributions. This article illustrates the interplay of those limits and includes examples of the application of the AGI limitations.

The 100% of AGI contribution limit applies only to gifts of cash directly to charities (not including family-funded private foundations). The 100% of AGI limit does not apply to contributions to supporting organizations. The limit also excludes gifts to donor-advised funds “for the establishment of a new, or maintenance of an existing, donor-advised fund.” The distinction between the language used to describe the exclusion of these gifts (i.e. all gifts to supporting organizations, but gifts to a donor-advised fund are only excluded if “for the establishment of a new, or maintenance of an existing, donor-advised fund”) is difficult to understand. Possibly you can make gifts to a donor-advised fund if they are dispersed from the donor-advised fund soon thereafter. However, unless and until the Internal Revenue Service issues guidance on the meaning of that phrase, donors who wish to maximize the 100% of AGI limit should abstain from gifts to donor-advised funds (as well as supporting organizations and private foundations) in 2020.

I have publicly traded stocks that I have held for more than one year. I want to give to charity as much appreciated stock as allowed, then cash. What is the most I can give and get a current deduction?

You can give 30% of your AGI in stock and 70% in cash directly to charities.

What happens if this year I give 20 % of my AGI to my donor-advised fund, supporting organization and/or private foundation and 80% in cash directly to charity?

Only the 80% of cash given directly to charities can be deducted this year.

What happens to the 20% that I couldn’t deduct?

This creates a charitable contribution carry-forward which can be used in the succeeding five years to the extent that the percentage limitations are not exceeded in that year after first applying the percentage limits to the contributions made in that subsequent year.

DISCLAIMER: The information provided herein does not, and is not intended to, constitute personalized financial or legal advice.  The contents of the article are for general informational purposes only, and should not be relied acted upon without specific professional legal, or financial advice, based upon an individual’s situation.

Written by:

Bernie Kent, JD, CPA, PFS

Chairman, Schechter Investment Advisors // Senior Advisor

Bernie Kent is Chairman and Senior Advisor at Schechter Investment Advisors in Birmingham, Michigan. Previously, Bernie was the Midwest Regional Partner in charge of Personal Financial Services for PricewaterhouseCoopers LLP, where he advised more than 25 CEOs of New York Stock Exchange-listed companies as well as 25 families with more than $100,000,000 of net worth.