#GivingTuesday Know How Charitable Contributions Have Changed Under the CARES Act
December 1st is #GivingTuesday, an idea that was created in 2012 to encourage people to do good. Since its inception, GivingTuesday has become a significant fundraising day for many nonprofit organizations. Making a donation to your favorite charity helps the organization fulfill its charitable purpose and may also help reduce your Federal tax bill.
Changes to Charitable Contributions in 2020
To help stimulate charitable contributions to nonprofit organizations experiencing a decline in giving, Congress included provisions in the CARES Act that increased the tax impact of donations by adding a new deduction and changing limitations on deductions.
Taxpayers who itemized deductions have historically been able to deduct charitable contributions made to qualified charitable organizations, those who do not itemize received no deduction. The CARES Act permits eligible individuals who do not itemize deductions to deduct up to $300 in cash charitable contributions as “above-the-line” deductions – directly reducing adjusted gross income (AGI). Thus, for 2020, eligible individuals can take both the standard deduction and the new charitable contribution deduction.
While qualified charitable contributions were able to be taken as itemized deductions, there had been limitations based upon AGI. Under the CARES Act, individuals who itemize deductions can elect to deduct cash contributions made to qualified public charities up to 100% of their AGI, up from a previous limit of 60%. Deductibility of qualified charitable contributions has also increased for corporations up to 25% of taxable income, up from the previous limit of 10%.
Other Contributions
An individuals’ ability to deduct up to 100% of their AGI is for cash contributions only, however, non-cash contributions are still deductible for those itemizing deductions. Non-cash contributions are deductible at their fair market value at the time of the donation. Different types of property have different limitations on deductibility, so please consult with us prior to contributing to determine your ability to deduct.
Year-End Tax and Estate Planning Strategies
Charitable giving can be an important part of year-end tax and estate planning strategies. The changes enacted under the CARES Act provide new planning opportunities. If you would like to discuss how strategies for your specific situation, please know we are available to discuss this with you.
Questions
Should you have questions about charitable contributions or other topics, you may reach us by phone at 215-675-8364.
DISCLAIMER: The WM Daily Update COVID-19, COVID-19 Business Resources and COVID-19 Client News Alerts and other related communications are intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.
