The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on March 27, 2020. The act contains a few provisions that may have an effect on charitable giving and which may enhance charitable giving incentives:
- Above-the-line deduction. Under prior rules, individuals who do not itemize their deductions on their income tax returns could not take a charitable deduction for cash contributions to qualified charities. The CARES Act adds a new above-the-line deduction that allows an individual who does not itemize to deduct up to $300 of cash contributions to a qualified charity. This is in addition to the standard deduction.
- Relaxed limitations on deductions for individuals. For individuals who choose to itemize, IRC Section 170(b)(1) limited the deduction for cash contributions to qualified charitable organizations to 60% of the individual’s adjusted gross income. Under the CARES Act, however, the deduction for cash contributions to a qualified charitable organization in 2020 is increased to 100% of the individual’s adjusted gross income. If the contribution exceeds the limitation, the individual can still carry forward and utilize the excess amount over the following five years.
- Relaxed limitations on deductions for corporations. Under prior law, corporate deductions for cash contributions to qualified charities were limited to 10% of taxable income. The CARES Act increases this limitation for cash contributions to qualified charities in 2020 to 25% of the taxable income of such corporation. The corporation can also carry forward and utilize any access amount over the following five years. In addition to the increase in the limitation for deductions of cash contributions, the limitation for deductions of contributions of food inventory by a corporation is also increased from 15% to 25%.
- Qualified charitable organizations. Cash contributions must be made to a public charity and cannot be made to a donor advised fund or private foundation.
Learn more from the IRS about how the CARES Act changes deducting charitable contributions HERE.
The CARES Act provides increased donor incentives, but SNAP recommends you contact a financial advisor if you have any questions or concerns about how the CARES Act impacts your charitable giving.
If you would like to make a donation, you may visit our secure webform HERE.