The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27 and effected tax law revisions for 2020 that are intended to promote charitable giving in the wake of the COVID-19 pandemic.
Two of the most significant changes affecting individuals include:
- Allowing non-itemizers (taxpayers who claim the standard deduction) to deduct cash contributions to public charities up to $300. The incentive applies to cash contributions made in 2020 and can be claimed on tax forms next year. Any amount you donate in 2020 under $300 can now be added to the standard deduction and, in turn, reduce your taxable income by that amount. This does not include donor advised funds (DAFs) or supporting organizations (SOs).
- For example: Were you to donate $100 to AHN, the amount of income taxed by the federal government would be reduced by $100. For someone in the 22% tax bracket, this donation would reduce your tax bill by $22 for 2020 all other things being equal. As such, a $100 donation to AHN would only cost you $78 as the other $22 would have been going to the IRS anyway
- Raising the limit on cash contributions to public charities by those who itemize deductions to 100% of adjusted gross income (AGI). The Act raises the existing cap from 60% of adjusted gross income to 100%. This does not include donor advised funds (DAFs) or supporting organizations (SOs).
- Were you considering a larger gift to AHN at some point? This one year adjustment to the tax code might be the opportunity you were looking for. It materially increases the amount that is deductible relative to your income providing a nice incentive for philanthropy in 2020.
Similarly, the 10% of taxable income limitation on charitable contribution deductions for corporations is increased to 25% of taxable income for these cash contributions. Any of these contributions by an individual or corporation in excess of the new limit can be carried forward under the normal rules.
We encourage our donors to consult with their professional advisors as to how the CARES Act provisions might impact their individual tax planning.
If you have any questions, please contact Nora Ritinski, Director of Institutional Advancement at firstname.lastname@example.org