Charitable organizations are facing significant hardships due to the COVID-19 crisis. Fortunately, the newly enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provides new tax incentives for charitable giving, encouraging individuals and businesses to support their favorite charities during this time of need. The CARES Act specifically provides a new above-the-line deduction for non-itemizers and increases the charitable deduction limitations for other donors.
If You Take the Standard Deduction
For 2020, the standard deduction is $12,400 for single individuals and $24,800 for married individuals filing jointly. Normally you need to itemize to get the tax-benefit of your charitable contributions. However, if you take the standard deduction in 2020, the CARES Act allows each individual up to a $300 additional above-the-line deduction for cash charitable contributions. If you itemize, you cannot take this new deduction.
If You Itemize
Individuals and corporations who itemize can now deduct more of their charitable contributions in 2020. For individuals, the CARES Act replaces the 60% AGI (Adjusted Gross Income) limit for cash charitable contributions made in 2020. Under the CARES Act, you can now deduct up to 100% of your AGI. For corporations, the CARES Act increases the charitable deduction limit to 25% of taxable income, up from a previous limit of 10%. Any donations over those amounts may still be carried over for 5 years and deducted later.
To qualify for the increased limits and new deductions, the contributions must be cash contributions made in the calendar year 2020. In addition, the contributions must be made to public charities – contributions to Donor Advised Funds and Supporting Organizations do not qualify.
If you have questions about the new tax provisions under the CARES Act, please contact Tara Stark at [email protected].
This article provides a general overview of the law. It is not intended to be, and should not be construed as, legal advice for any particular fact situation.