Congress established the Coronavirus Aid, Relief and Economic Security (CARES) Act to help combat the far-reaching impacts of COVID-19. The bill provides increased tax incentives for charitable giving for both individuals and corporations, with an intent to stimulate philanthropy throughout America.
Here is how the CARES Act increases donation tax deductibility in 2020:
UNIVERSAL DEDUCTION FOR DONATIONS UP TO $300
For those who no longer itemize charitable giving, under the CARES Act taxpayers are entitled to an above the line deduction on their 2020 federal tax return of up to $300 for charitable cash contributions, even if the standard deduction is taken. Married-filing-jointly taxpayers will receive an above-the-line of up to $600.
RAISING THE CHARITABLE GIVING DEDUCTION CAP
For donors who typically itemize their deductions and, therefore, are able to directly write-off charitable gifts, the current deduction cap is 60% of adjusted gross income(AGI). Corporations are able to deduct charitable gifts up to 10% of taxable income.
However, for tax year 2020 only, the CARES Act lifts these caps to 100% AGI for individuals and joint filers, while the cap for corporations is lifted to 25% of taxable income.
The window for taking advantage of these changes for making charitable donations to organization like RAHC closes on December 31, 2020.
As always, we recommend consulting your financial and/or tax advisor for details regarding charitable contributions.