Jul 01, 2020
Ben Seyfer, Senior at Terry Lockridge & Dunn
The CARES Act authorizes several new tax breaks for charitable donations in 2020. Here are three tips to help your favorite charity while receiving a tax break:
Donate up to $300. More taxpayers are claiming the standard deduction instead of itemizing deductions thanks to the 2017 tax reform, which means that charitable contributions are not tax deductible for many Americans. The CARES Act, however, allows an above-the-line deduction of up to $300 for donations to qualified charities other than donor-advised funds (DAF) or private foundations. In other words, you get a deduction whether you itemize or not. Any disallowed contribution is carried forward for five years.
Donate up to 100% of AGI. The CARES Act also creates a tax incentive to donate as much of your 2020 income as you feel like giving. The annual deduction for monetary donations is normally limited to 60% of adjusted gross income (AGI). But the CARES Act increases this threshold to 100% of AGI. You can therefore effectively donate as much as you earn. This provision also does not apply to either DAF or private foundation donations. Any disallowed contribution is carried forward for five years.
Businesses can contribute more! Businesses can also increase their giving thanks to two different provisions in the CARES Act. First, it raises the usual limit for corporate donations from 10% of taxable income to 25%. Second, it boosts the threshold for a special enhanced deduction for gifts of food from 15% of taxable income to 25%. Under both provisions, any disallowed contribution is carried forward for five years.
What you need to do. Be mindful that the usual rules for substantiating charitable donations remain in effect, so remember to keep good records. For example, for contributions of $250 or more of cash or property, you must obtain and maintain a contemporaneous written acknowledgment from a qualified organization. It should indicate the cash amount or description of any property you contribute.
Feel free to reach out to Ben at firstname.lastname@example.org, or your tax accountant at Terry Lockridge & Dunn. They can be reached at 319-364-2945 in Cedar Rapids, or 319-339-4884 in Iowa City.