Learn about the Federal CARES Act

Here’s some news that all donors need to know…..

The Federal CARES Act passed last spring to stimulate the economy includes a tax provision that may benefit donors both large and small.

For smaller donors who take the standard deduction: 

The Act establishes a universal provision that allows you to deduct non-itemized, above the line charitable contributions. Typically, you need to itemize your personal deductions in order to claim a charitable contribution. The Tax Cuts and Jobs Acts (TCJA) that went into effect in 2018 and nearly doubled the standard deduction changed the way many people do their taxes, eliminating the deductions many took for charitable contributions. But the CARES Act has instituted a provision that allows for a $300 deduction for charitable contributions, whether the taxpayer itemizes OR takes the standard deduction.</p

There are a few points to note:

  • If you are married and filing jointly, your deduction is still limited to $300.
  • Deductions under the CARES Act must be cash (including check and credit card payments) and given to a 501(c)(3) public charity.
  • You can list your contribution as an adjustment to income on your taxes, reducing your adjusted  gross income up to $300.
  • You don’t need to include documentation when you file gifts of $250 and under (be sure to keep proof of cash receipts)
  • All gifts exceeding $250 need to include the receipt or proper documentation when filing

Basically, under the CARES Act, if you donate up to $300 in cash to a qualified organization, your adjusted gross income will be reduced by up to $300.

What about those who DO itemize? Is there an additional benefit?

Another change under the CARES Act is that for those who do itemize deductions for 2020, you can now deduct charitable contributions of up to 100% of your AGI (adjusted gross income). That’s an increase from the 60% that was allowed previously.

Is there a benefit for Corporate Donors too?

Corporate donors are not left out. The CARES Act increased the amounts of annual charitable deductions for corporations from 10% of taxable income to 25%. Donations greater than 25% can be deducted within the following five years.

As always, it is recommended that you consult with your accountant or tax professional to make sure these strategies work for you.