Are You Donating to Charity this Year?

Tax payers that itemize deductions on their federal income tax return can generally deduct gifts to qualified charities. The 2017 tax reform significantly increased the standard deduction resulting in far fewer taxpayers reducing their taxes by itemizing deductions.  To encourage charitable giving and provide a bit of tax relief, the Coronavirus Aid, Relief, and Economic Security (CARES) Act created two temporary changes to the limits on charitable contributions.

For the 2020 tax year, the CARES Act allows for an above-the-line charitable deduction of up to $300 for those that made a charitable contribution but take the standard deduction.  Taxpayers that can claim the deduction will lower their adjusted gross income (AGI) by $300.

Taxpayers that itemize cannot claim the $300 above-the-line deduction. Instead, their usual itemized charitable deduction cap of 60% of AGI is increased to 100% for cash contributions.  Contributions that exceed AGI may be carried over to the following tax year.

To qualify for the temporary tax benefit, the charitable contribution must be a cash contribution made in 2020 to a qualifying organization.[1] Noncash contributions, such as securities, are not qualified contributions and are subject to the normal limits.

Clients that are considering a gift to charity this year and would like to take advantage of the deductions, should reach out to us with any questions.  Charitable contributions need to be made by December 31, 2020.

[1] “Charitable Contribution Deductions,” Internal Revenue Service, IRS.gov, September 23, 2020, (Source)