When the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed back in late March, not only did it offer stimulus checks for some citizens and permanent residents, but it also temporarily amended some of the tax reforms that were passed in 2017 related to charitable giving. The reforms of 2017 effectively doubled the standard deduction for many tax filers, and these new amendments offer some benefits related to charitable giving — which we want to tell you about! Because everyone’s tax situation is unique, be sure to discuss your circumstances and the CARES Act with your financial advisor.
Here’s how the CARES Act created two temporary changes to certain tax donations:
1. Universal deduction for donations up to $300.
If you make charitable donations in 2020, this amendment allows for a deduction of up to $300. This is an above-the-line deduction that is subtracted from the individual taxpayer’s income prior to the calculation of their adjusted gross income. Because it is an above-the-line deduction, it means that your total taxable income will be reduced by $300. This allows an individual who does not itemize to deduct up to $300 of cash, credit card, or check contributions to a qualified charity, while having no impact on the standard deduction. IRS guidelines aren’t clear on whether joint/married filers can take a $600 deduction so be sure and discuss with your financial advisor. So, with savings like this, now is the perfect time to consider increasing your annual donation!
2. Increased deductions for itemizers
If you do itemize your deductions, the CARES Act has created a benefit which increases the deduction of the individual’s adjusted gross income, or AGI, from 60% to 100% for cash contributions to a qualified charitable organization. In lay-terms? You can give charitable donations equivalent to your AGI and apply a 100% deduction when you file your taxes. This is only applicable to qualified charitable organizations and not to foundations or donor advised funds.
Donations must be made in 2020. As you consider and plan your end of year giving, please consider increasing your donation – support Yosemite and reap the benefits of the tax deductions offered by the CARES Act. While we can’t offer tax advice, we’d love to hear from you with any questions. From the CARES Act to gifts through your IRA to gifts of stock, there are tax-smart strategies that almost anyone can access.