CARES Act Changes Deductions for Charitable Contributions in 2020

Cash Donations up to $300.00 Now Deductible Even if You Do not Itemize

Many of our nation’s charitable organizations are struggling to help those suffering from COVID-19 at a time when charitable donations have decreased because of changes in the tax law in 2017. Donations decreased when the Tax Cut and Jobs Act of 2017 became effective eliminating the deduction for charitable contributions for most taxpayers. This happened because charitable contributions could only be deducted if a taxpayer itemized deductions and over 87% of filers did not itemize once the standard deduction doubled under TCJA.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act included several tax changes to encourage charitable donations. The tax provisions increase the allowable deductions for both individual taxpayers who take the standard deduction and those who itemize, as well as increasing deduction limitations for corporations.

For Taxpayers Who Take a Standard Deduction

The Coronavirus Aid, Relief and Economic Security (CARES) Act included numerous tax changes to help charities, including an allowance of an above-the-line deduction for up to $300 to qualifying charitable organizations for taxpayers who choose the standard deduction instead of itemizing. The deduction translates to a deduction that lowers both adjusted gross and taxable income on a “dollar for dollar” basis.

For Taxpayers Who Itemize

Under the CARES Act, taxpayers who itemize deductions for 2020 can deduct charitable contributions of up to 100% of their adjusted gross income (AGI). This is an increase from the 60% cap that was allowable under TCJA.

For Corporations

The CARES act also increased the amount of annual charitable deductions from corporations. The 10% annual cap under TCJA has increased to 25% under the CARES Act for 2020 with donations that exceed 25% being deductible within the following five years.

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This notice is provided for informational purposes and is not intended to provide specific tax advice. For more information about the Work Opportunity Tax Credit or other Credits contact your tax accountant or tax attorney.