CARES Act & How it Affects Charitable Deductions 2020
Given the dire situation that the pandemic has left many individuals and charitable organizations in, now is a better time than ever to donate to those in need. On top of the joy you experience from helping others around the holidays, you can also receive a tax deduction for your charitable donation, even if not itemizing when filing your taxes. Under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), individuals can deduct up to $300 for cash donations when made BEFORE THE END OF THIS YEAR.
The 2017 Tax Cuts and Jobs Act roughly doubled the standard deduction and got rid of several itemized deductions. This caused an increase in the number of individuals taking the standard deduction instead of itemized deductions. Currently, only 11% of filers itemize on their tax returns. The increase of the standard deduction consequently disincentivized individuals from donating (which is typically an itemized deduction).
The CARES Act allows both individuals who itemize and those who take the standard deduction to receive a tax benefit for donating. This makes it easier and more desirable for all taxpayers to make donations. The maximum tax deduction is $300 and reduces adjusted gross income. A lower adjusted gross income can affect whether you receive certain tax credits and can even move an individual into a lower tax bracket.
It is important to note that in order for the donation to be eligible for a deduction, it must be made in cash (or through a check or credit card). The donation also must be made to a qualified 501(c)(3) public charity. The IRS has not made it clear whether individuals who are married filing jointly can deduct $600. For guidance you can talk to a tax-planning professional.
If you are struggling to decide where to donate, The Council of Foundations offers an online search tool that can help you find local charities. Helping your local community can allow you to see the changes your money is making and the lives you are impacting. Helping pandemic-stricken charities can significantly benefit your community.