Beginning with 2020 tax returns, taxpayers will be able to claim up to $300 in cash contributions to charity as a deduction without itemizing and individuals and corporations that do itemize can now deduct greater amounts of their contributions to charity.
This new law, which was included in the CARES Act and is currently in place for one year, is intended to spur charitable giving by offering all taxpayers the ability to access a charitable deduction.
Previously, as many as 85 percent of Americans did not itemize their tax returns, making them ineligible for charitable deductions. Now that opportunity has changed.
The goal with the new $300 deduction is to encourage more individuals to help the nonprofit organizations providing direct services and support to those impacted by the COVID-19 health and economic crisis.
In addition to the $300 deduction, individuals and corporations that do itemize each year can now deduct greater amounts of their contributions to charity. Up from 60% previously, individuals can now deduct donations up to 100% of their adjusted gross income for 2020. Corporations are now able to deduct up to 25% of taxable income, up from 10% previously.
Here’s what you need to know about the nuance of the law:
Who is eligible?
Taxpayers who do not itemize their deductions are eligible to claim the new $300 deduction. For couples who file jointly, the CARES Act now allows you to take a $600 charitable deduction.
What assets can be donated?
Only cash gifts are eligible for the $300 deduction, meaning appreciated assets or real estate are not included.
Can I contribute to a donor-advised fund or private foundation?
The charitable deduction does not apply when gifts are made to an existing donor-advised fund or to set up a new donor-advised fund. To be eligible for the $300 deduction, gifts must be made to specific initiatives, such as the San Diego COVID-19 Community Response Fund, or your preferred nonprofit organization.
For individuals and corporations itemizing their taxes, the new 100% and 25% deductions, respectively, apply only to donations to charities. The old limits still apply for gifts to private foundations and direct donor-advised fund contributions.
What if I haven’t filed my 2019 taxes?
If you have yet to file your 2019 taxes, it’s important to note that this deduction does not apply to your 2019 filing. Currently, the new limits and deductions in the CARES Act only apply to 2020 filings.
