The CARES Act
Recently, Morgan Simon at Forbes published a very helpful guide regarding new charitable rules that incentivize non-profit support during the pandemic. You can read the full article HERE. The authors of The CARES Act recognized the desire of communities to support non-profit organizations during this economic hardship. As a result, contributors can enjoy new added tax benefits for aligning their dollars with the organizations they support and love. Here’s how:
Anyone who gives up to $300 can get an easy tax break!
Under the CARES Act, taxpayers can now take a deduction for up to $300 in charitable contributions if they don’t itemize on their 2020 tax form. This is a flip from the previous rule that required itemization for a tax break. According to law firm McGuireWoods LLP, “Because of the significant increase to the standard deduction for individuals after the enactment of the 2017 Tax Act, it is estimated that more than 85% of taxpayers will not claim itemized deductions on their federal income tax returns for tax year 2019. As a result, many people have learned they did not or will not receive any direct tax benefit for their 2019 charitable contributions.” Ouch! However now, it’s easier than ever for donors to be sure of their tax savings while supporting the organizations they care about, whether they’re able to contribute $50 or $300.
Wealthy donors can give in higher amounts, while saving more money in the process.
According to Section 2205 there is now no limit to the deductions you can take for charitable contributions if you itemize your contributions. Previously, you could only deduct up to a maximum of 60% of your adjusted gross income (AGI) via charitable contributions. But under the new guidelines, 100% of your donation would now be tax deductible, meaning if your taxable income is $500,000 in 2020, and you donate $500,000 to qualified organizations in 2020, you won’t have to pay taxes on your income. This change applies only to cash gifts made to charitable organizations qualified by the IRS (section 170(b)(1)(A),0).