The economic hardships caused by the COVID-19 pandemic have had a devastating effect on many charities. Cultural organizations that depend on revenue from visitors and event attendance may not reopen for many months. Food banks and other social services agencies are struggling with unprecedented demand from people who have lost their jobs. And many organizations that are still operating have suffered dramatic drops in donations since this crisis began.
To encourage people and businesses to give more, the Coronavirus Aid, Relief, and Economic Security (CARES) Act provides several incentives for those who make donations in 2020.
A $300 deduction for non-itemizers
Most Americans can’t itemize tax deductions, choosing instead to use the standard $24,000 annual deduction for married couples ($12,000 for individual filers).
To encourage more of these non-itemizers to give, the CARES Act will allow them to take a one-time deduction of up to $300 for cash gifts made to qualified charitable organizations in 2020.
Unlimited deductions for wealthier donors
The CARES Act offers even more generous tax benefits for higher-income donors. Normally, the deductible value of cash donations for those who itemize can’t exceed 60% of their adjusted gross income (AGI). This limit is suspended in 2020, so itemizers can deduct all of their cash donations, up to 100% of their AGI.
Higher limits for business contributions
American businesses account for a huge proportion of charitable donations. To motivate them to give even more, the CARES Act increases the limit of deductible charitable contributions made in 2020 from 10% to 25% of the company’s taxable income.
Remember—cash and qualified only
Again, it’s important to remember that these special provisions only apply to cash donations made in 2020. Gifts of securities, business shares, artwork and collectibles are not eligible. And to qualify for these deductions, donations must be made only to qualified public charities. Donations to donor advised funds, supporting organizations and most private foundations are not eligible. If you’re unsure of whether a certain organization qualifies, contact your accountant or tax professional.
This article was authored by Chris Gullotti and Jeffrey Briskin. Chris is a financial advisor and Partner located at Canby Financial Avisors, 161 Worcester Road, Framingham, MA 01701. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 508.598.1082 or [email protected]. Jeffrey Briskin is Director of Marketing at Canby Financial Advisors.
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