NOTE: The following is not legal advice or a legal reading of the CARES Act. Please discuss these opportunities with your Board, legal counsel or other advisors before sharing with your financial partners.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress with overwhelming, bipartisan support and signed into law by President Trump on March 27th, 2020. It includes charitable tax deductions for some that are only available this tax year (2020).

New Tax Deductions for 2020 Makes it Easier to Give

Part of the 2020 CARES Act offers a new universal deduction for charitable contributions. The bill makes a new deduction available, without itemizing, of up to $300 per taxpayer ($600 for a married couple) in annual charitable contributions in 2020. For those who itemize in 2020 only, the CARES Act allows deductions of contributions up to 100% of their adjusted gross income. Corporations may increase giving to 25% of their taxable income.

Details

Deductions for Charitable Contributions up to $300 made in 2020

• New deduction is for up to $300 per taxpayer ($600 for a married couple) in annual charitable contributions in 2020.
• This is for people who take the standard deduction when filing their taxes. (They do not itemize their deductions.)
• Contributions made by cash, check, credit card to a 501(c)3 tax-exempt organization qualify. Property, clothing/goods, and stocks do not qualify.
• Contributions made since January 1, 2020 may be counted toward the $300 cap. (Donations to a donor-advised fund (DAF), and some other select funds/foundations do not qualify for the deduction.)
• Taxpayers will list it as an adjustment to income on Schedule 1 of Form 1040, and then deduct it from their gross income (along with any/all other adjustments to income) on the first page of their 1040.

No Annual Limit on 2020 Charitable Deduction by Itemizers

For 2020 only, the CARES Act allows itemizers to deduct contributions up to 100% of their AGI. Thus, for example, if someone’s AGI is $100,000, they may deduct $100,000 in charitable contributions and wipe out their income tax liability entirely.

Donors who use this provision must tell the IRS. Any contributions in excess of total AGI may be carried forward for up to five additional years

Corporations

Usually giving is limited to 10% of taxable income for the corporation. That limit has been increased to 25% of the taxable income, making charitable gifts much more attractive to business donations.