The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides new incentives for charitable donations in 2020. Benefits of this new legislation include:
A universal $300 above-the-line deduction for qualified charitable contributions. This universal (or non-itemizer) deduction applies to charitable cash contributions to public charities. Beginning in 2020, non-itemizing individuals can take the $300 deduction, while married-filing-jointly taxpayers will get an above-the-line deduction of up to $600. The incentive applies to cash contributions and can be claimed on tax forms beginning next year. If you itemize deductions, this provision will not provide you with any additional benefit.
A 100 percent adjusted gross income (AGI) limit for cash gifts for those who itemize. The CARES Act raises the existing cap on annual contributions for those who itemize from 60 percent of AGI to 100 percent.
Limits on cash contributions from corporations are increased from 10 percent to 25 percent of taxable income for 2020.
The increased charitable deduction limitations described above for individuals and corporations only apply to cash gifts to public charities and are not available for non-cash gifts, gifts made to private foundations, donor-advised funds, supporting organizations, or for cash deductions carried forward from prior years.
Check with your financial advisor to learn more about these new benefits.
Background The CARES Act was signed into law on March 27, 2020 by President Trump following the approval of the Act by the Senate on March 25 and the House of Representatives on March 27. It provides temporary increases in deduction limits in order to encourage immediate charitable giving. The deduction limits for cash gifts to “public charities” within the 2020 taxable year are expanded for both individuals and corporations. The Act does not require that contributions be devoted to relief of the adverse effects of the Coronavirus. While these changes were put in place for 2020, there is no provision in the law for the new regulations to sunset. Page updated May 12, 2020