New charitable giving deductions available through the CARES Act for Nonprofits – Friday, March 27, the Congress passed and the President signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Here’s How it Works
New Deduction Available: The bill makes a new deduction available for up to $300 per taxpayer ($600 for a married couple) in annual charitable contributions. This is particularly beneficial to people who take the standard deduction when filing their taxes (in other words for taxpayers who do not itemize their deductions). It is calculated by subtracting the amount of the donation from your gross income. It is an “above the line” adjustment to income that will reduce your AGI, and thereby reduce taxable income.
To qualify, you would have to give a donation to a qualified charity. If you have already made your donation since Jan. 1, that contribution counts toward the $300 cap. A donation to a donor-advised fund (DAF) does not qualify for this new deduction.
New Charitable Deduction Limits: Also part of the bill, individuals and corporations that itemize can deduct much greater amounts of their contributions.
Individuals can elect to deduct cash contributions, up to 100% of their 2020 adjusted gross income, on itemized 2020 tax returns. This is up from the previous limit of 60%.
Corporations may deduct up to 25% of taxable income, up from the previous limit of 10%.
The new deduction is only for cash gifts that go to a public charity. If you give cash to, say, your private foundation, the old deduction rules apply. And while the organizations that manage DAF’s are public charities, you do not get the higher deduction for donating cash to your DAF. These new limits do not apply to gifts of appreciated stock.
If your assets are substantial enough that you can give more than your income this year, you won’t lose the deduction for the excess amount. You can use it next year, as has always been the case.