On March 27, 2020, the bipartisan Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. In order to encourage charitable contributions at this unprecedented time, the CARES Act made some valuable changes to the way those contributions are treated on your tax return. The first change worth highlighting is the treatment of charitable contributions up to $300 as an above the line deduction for the 2020 tax year (possibly $600 for a married couple). If you do not itemize your deductions, you are eligible to take this charitable deduction. Additionally, if you itemize your deductions and make a charitable contribution of cash directly to a public charity, you are not limited to 60% of your adjusted gross income (AGI) for 2020, but instead may deduct up to 100% of your AGI for this year.
What may this mean for you? Your gift of cash to a public charity may be eligible for one of these tax benefits. If you take the standard deduction, you can take a charitable deduction of up to $300. Alternatively, if you plan on making a large charitable gift, you may be able to offset up to 100% of your AGI, potentially eliminating your 2020 tax burden.
There may also be incentives for your business to make charitable contributions. The limitations on deductions for corporate gifts of both cash and food inventory has been increased. Please contact us if you would like to discuss further.