New Provisions Under the Coronavirus Aid, Relief and Economic Security (CARES) Act


As the holiday season approaches, you might be looking toward making a donation to a charitable organization.  For many people, supporting a favorite cause is as much a part of annual traditions as family get-togethers and turkey dinners.  However, as so much around the world has been affected by COVID-19, many charities are struggling.  The good news is that if you make a donation this year, there are two new tax rules, that apply only for 2020, which offer benefits in exchange for your generosity. 

Congress included two new charity tax rules in the CARES Act, and they are only effective in 2020.

IF YOU DON’T ITEMIZE YOUR DEDUCTIONS FOR 2020

If you don’t itemize, you can take both the standard deduction and a one-time $300 “above-the-line” tax deduction for cash charity contributions made in 2020.

  • This reduces your Adjusted Gross Income (AGI).
  • This one-time $300 deduction is per return.  A married couple can take a $300 deduction, not a $600 deduction.
  • The charitable donation must be a CASH contribution (this includes checks and credit card payments).
  • You cannot use a carryover amount from the prior year, and the amount cannot be carried over into 2021.
  • This “above-the-line” tax deduction is only applicable if you do not itemize on your 2020 taxes.

IF YOU DO ITEMIZE YOUR DEDUCTIONS FOR 2020

If you do itemize, the normal cap on charitable gifts is suspended for 2020.

  • Previously, there used to be a 50% of Adjusted Gross Income (AGI) limit on charitable donations which was increased to 60%-of-AGI in the Tax Cuts and Jobs Act of 2017.  This rule is now suspended for 2020, allowing a charitable contribution up to 100%-of-AGI.
  • This charitable donation must be a CASH contribution (or check or credit card payment) made in 2020. 
  • You cannot use appreciated securities and you cannot use charity carry-over amounts from the prior year to reach this limit.  They retain their lower limits.
  • This cannot be used for gifts to donor-advised funds, private foundations or supporting organizations.  These too retain their lower limits.
  • This tax deduction is only applicable if you itemize on your 2020 taxes.

Unfortunately, the most challenging times also bring out scammers.  Be mindful of charities who may contact you seeking donations for coronavirus victims and their families.  Carefully vet unfamiliar charitable organizations before making financial contributions and consider working with your financial advisor or tax preparer to create a charitable giving plan that is right for you.

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