Did you know that your gift is eligible for a 100% tax deduction under the CARES Act legislation? The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020, and extended financial aid to for-profit and nonprofit businesses affected by the COVID-19 pandemic. Among the Paycheck Protection Program and Emergency EIDL Grants, the legislation also extended tax deductions for charitable giving.
Specifically, for the entire year of 2020, the limitation on how much of your charitable donations you can deduct against your income, no matter who you are or how much you give, has been lifted. Previously, it was a maximum of 60% for cash donations and 50% for non-cash contributions.
Under the CARES Act, these limitations have been removed for federal income tax purposes. Additionally, anyone who donates up to $300, whether they itemize or not, can deduct that against other income for donations in 2020 (considered an “Above the Line” deduction).
If you are an individual who takes the standard deduction:
The bill makes a new deduction available for those who do not itemize, up to $300 per taxpayer ($600 for a married couple) in annual charitable contributions. 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 of the year 2020. In order to claim an above-the-line deduction, you simply need to complete your tax return at the end of the year. Above-the-line deductions are easy to spot. You can find them above the line where you’re required to enter your adjusted gross income.
If you are an individual or corporation that itemizes:
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, such as Life Services of Spokane.