The CARES Act for Donors in 2020

There are Two New Tax Benefits for Donors in 2020

The Coronavirus Aid, Relief, and Economic Security (CARES) Act created two, temporary changes to the tax treatment of donations.

For those who do not itemize their charitable giving, the CARES Act will allow these individual taxpayers to deduct cash donations to a qualified charity (FPCA is a qualified charity) of up to $300 on their 2020 federal tax return, even though they take the standard deduction. Married-filing-jointly taxpayers will get an above-the-line deduction of up to $600. “Above the line” means it reduces taxable income before it is “adjusted”.

For those donors who are able to itemize their deductions, and directly write off gifts to charity, the CARES Act lifted the deduction cap from 60% of AGI (adjusted gross income) and raised it to 100% of AGI for individuals and joint filers. For individuals, it could theoretically mean zero taxable income if someone gives large gifts. The percentages relate to adjusted gross income (AGI). For 2020, a person who itemizes (uses Schedule A) may take a charitable deduction of up to 100% of adjusted gross income (AGI – the amount of income eligible to be taxed). In 2021 it will only be 60% of AGI.

The deductibility cap for donations to donor-advised funds, gifts of appreciated stocks, and gifts to private foundations are not included and remain subject to the 30% AGI rule.

Please note: This information is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in any examples are for illustrative purposes only.