The CARES Act has implemented a variety of measures to help individuals and businesses get through these difficult times. The CARES Act also includes provisions designed to encourage courage charitable support and giving. These provisions not only benefit charities, they also benefit those who are charitably inclined.
Above the line Charitable Contribution
If you do not itemize your deductions, you can now claim an above-the-line tax deduction for cash donations up to $300 to qualified charitable organizations. The charity needs to be a public charity other than a supporting organization or donor advised fund. This will only be effective for your 2020 return and only applies to charitable cash contributions that are actually made in 2020.
If you give assets other than cash, you will be subject to the regular rules and need to exceed the standard deduction to get a tax benefit. If you are able, however, please give because the organizations you support still need your support.
Individual Charitable Contribution Limits
Prior to 2020, individuals could only deduct 60% of your Adjusted Gross Income (AGI). The CARES Act replaces the 60% of AGI charitable cash contribution limit with a 100% limit for 2020. This means you can get a charitable contribution deduction for the full amount of your Adjusted Gross Income.
If you give an asset other than cash, you will be subject to a complex set of guidelines on how much you can deduct. The tax law allows you to deduct different percentages of your adjusted gross income depending on the type of entity to which you are contributing and the type of property you are contributing.
Corporations Charitable Contribution Limits
Corporations can deduct up to 25% of their taxable income for any cash contributions made to qualified charitable organization. The limit prior to the CARES Act was 10%.
Charitable IRA Rollover
The tax law allows those required to take required minimum distributions to suspend the distribution for 2020. If you don’t need the IRA income, you should consider donating different assets during 2020 if you are able.
While not every individual or corporation may have extra money to donate to charity given the present state of the economy, for those that can, this can be an opportune time to do so. Individuals can reduce their taxes and help their estate size and therefor their estate taxes through charitable gifting. Please contact us if you would like to learn more about how charitable gifting may be beneficial for your situation.