Charitable Giving Affected by CARES Act
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law by the President on March 27, 2020, has made changes to the rules regarding charitable giving for tax years beginning in 2020.
For the 2020 tax year, the deduction percentage limitation for charitable contributions of cash has been removed for individual taxpayers. The Tax Cuts and Jobs Act (TCJA) had provided for an increased limitation of 60% for cash contributions; however, the CARES Act would suspend the percentage limitations entirely. This simply means that any qualified contribution is allowed to the extent that the aggregate of such contributions does not exceed the taxpayer’s adjusted gross income. This type of provision allowing for an “unlimited” charitable contribution deduction has occurred in the past; however, this suspension is applicable only for cash contributions.
The CARES Act also increases the limitation on the corporate charitable contribution deduction from 10% of taxable income to 25% of taxable income. In addition, the limitation on contributions of food inventory is increased from 15% to 25%.
For tax years beginning in 2020, eligible taxpayers are entitled to an above-the-line deduction of up to $300 for qualified charitable contributions. An eligible taxpayer is an individual that did not elect to itemize deductions. A qualified charitable contribution is a cash contribution to a qualified tax-exempt organization. Although not a significant amount, individuals may find this provision important due to the increased standard deduction amount that made the threshold for itemizing beyond reach for many taxpayers.
If you have any questions about the CARES Act or any other legal issues, please contact one of our Trusts & Estates and/or Tax Group attorneys. Our physical office is currently closed pursuant to the Governor’s Business Closure Order, but MacDonald Illig attorneys are working remotely and are available at any time via e-mail or cell phone to assist you.