The CARES Act includes added financial incentive for community members who want to make donations in support of local efforts to combat the near- and long-term effects of the pandemic on our community. A universal tax break for charitable donations was included in the stimulus package and will go into effect for the 2020 tax year.
- Donors who take the standard deduction may also take an “above-the-line” deduction for up to $300 in charitable donations given in 2020. This effectively allows a limited charitable deduction to taxpayers claiming the standard deduction. For example, if you take the standard deduction and give $300 to charity, you will get a $300 tax break in addition to the standard deduction.
- For donors who itemize deductions, the limit on charitable deductions – generally 60% of modified adjusted gross income – doesn’t apply to qualifying cash contributions to public charities in 2020; instead the CARES Act allows taxpayers to claim a tax deduction of up to 100% of your Adjusted Gross Income for contributions to qualifying charities.
- For corporate donors, the limitation on charitable deductions, which is generally 10% of modified taxable income, doesn’t apply to qualifying contributions made in 2020. The new law temporarily lifts the limit from 10% to 25% of modified taxable income for 2020 filings.
Please consult your accountant or tax preparer for more information about these changes, and how they can help you help others during the COVID-19 pandemic.