To incentivize giving and help charitable organizations survive the pandemic, the CARES Act provides additional tax relief for donors on their 2020 tax return. Here are three ways the CARES Act might directly impact your charitable giving this year:
1. Above-the-line deductions for individuals who do NOT itemize.
For individuals who do not itemize, the CARES Act allows an above-the-line charitable contribution deduction for total qualified charitable contributions to public charities of up to $300.
Why is this good news? Under the 2017 tax law, the standard deduction was increased so much that much fewer people are itemizing deductions, including for gifts to charity. The above-the-line deduction allows non-itemizers take a charitable deduction as well.
2. Increased deductions for individuals who itemize.
For individuals, the CARES Act permits those who itemize to fully deduct qualified charitable contributions made in the 2020 tax year to public charities up to 100% of adjusted gross income. Prior to the CARES Act, there was a limit on deductions for cash contributions to charities up to 60% of adjusted gross income. Any excess cash contributions that are not deducted in 2020 can be carried forward subject to the 60% limitation in the succeeding 5 years.
3. Increased deduction limitations for corporations.
For corporations, the 10% taxable income limitation is increased to 25% of taxable income for cash contributions made in 2020 to public charities other than donor advised funds or supporting organizations. The deduction limitation for a charitable contribution of inventory is increased from 15% to 25% of taxable income.
As a 501 c(3), charitable contributions to the Sturgis Area Community Foundation, White Pigeon Area Community Foundation, and Constantine Area Community Foundation are tax-deductible. If you would like to make a tax-deductible gift today, click here.