Benefits for Those Who Make Charitable Contributions


When the CARES (Coronavirus Aid, Relief, and Economic Security) Act passed in March 2020, changes were made to the charitable deductions tax filers could take.  Under this act, these changes were only effective in 2020.  Once the Consolidated Appropriations Act of 2021 (CAA) was signed into law at the end of December 2020, these changes to charitable deductions were extended into 2021.  Let’s review the details.

Benefits for those who DO NOT itemize deductions (which is about 90% of tax filers)

CARES Act

  • 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 in 2020. This was changed for 2021. See below.
  • The charitable donation must be a CASH contribution. (This includes checks and credit card payments.)  A donation of goods, clothing or appreciated securities does not count.
  • You cannot use a carryover amount from the prior year.
  • You report this on Page 1 of Form 1040, line 10b.

CAA New Rules

  • This was extended to include 2021.
  • Instead of the $300 deduction, a married couple filing jointly can take a $600 deduction on their 2021 tax return.  This increase is not allowed for 2020.

Benefits for those who DO itemize deductions

If you do itemize, the normal cap on charitable gifts is suspended for 2020 and now 2021 as well.

CARES Act

  • Previously, there was a 50% of Adjusted Gross Income (AGI) limit on charitable donations which increased to 60%-of-AGI in the Tax Cuts and Jobs Act of 2017.  This rule is now suspended for 2020, and 2021 with the passing of CAA, 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 the tax year.
  • 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 your deductions.

CAA New Rules

  • This was extended to include 2021.

These changes were made as a result of COVID-19, in an effort to encourage charitable giving.  If this affects you, make sure to correctly deduct your charitable contributions on your tax return.  As these rules are new for this year, make a note and put it with your tax documents to make sure you get all of the tax benefits due to you.  If you have any questions regarding these changes, it can be helpful to speak with an accountant about your specific situation.  Please feel free to contact us if we may be of further assistance.

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