Increased Tax Deductions for Giving in 2020

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Increased Tax Deductions for Giving in 2020


As you may recall, back in the first quarter, the CARES Act (“the Act”) was passed. It addresses some of the impacts the coronavirus had on Americans and the economy. One of the provisions in the Act was a significant change to charitable donations – for 2020 only.  


Prior to the Act, charitable donations could be deducted up to 60% of adjusted gross income (AGI). However, in order to encourage those who can give more to actually do so in this year when charitable donations might be more important than ever, but are also down overall due to losses of jobs, overall uncertainty, and instability, the federal government increased the deductibility limit to 100% of AGI.

What does this mean?

The CARES Act makes a new deduction available for up to $300 per taxpayer ($600 for a married couple) in annual charitable contributions.
Individuals and corporations that itemize can deduct much greater amounts of their contributions. Individuals can elect to deduct cash contributions to a 501(c)(3) organization up to 100% of their 2020 adjusted gross income, on itemized 2020 tax returns. This is an increase from the previous limit of 60%. 
Corporations may deduct up to 25% of taxable income, up from the previous limit of 10%.

****(This isn’t intended to be used as tax advice. Please consult your tax accountant soon for specific details.


Important things to remember: 

  • Many people utilize Donor Advised Funds (DAFs). Donations to (or deposits into) these accounts may NOT exceed 60% of AGI in 2020. This did not change. Only amounts given directly to charities (501( c)(3) entities) qualify for deductions exceeding 60% of AGI.
  • Check with the state you live in to determine the deductibility of donations in excess of 60% of AGI for state income tax purposes. Each state may determine its own allowed level of deductible giving. This may or may not matter to you.
  • As in previous years, any charitable donations over the allowable limit (100% in 2020) can be carried forward and used in future years.
As always, please consult with your CPA or tax advisor before making any major decisions regarding your charitable giving.


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