CARES Act: Expands Charitable Giving Tax Deduction. Tax Implications for Businesses and Individuals due to COVID-19

The Corona virus Aid, Relief and Economic Security (CARES) Act will let taxpayers deduct up to $300 in charitable donations from their taxable income if the taxpayer normally takes the standard deduction. The rule will apply only to charitable contributions made in 2020. Taxpayers will be able to claim the deductions on their 2020 tax return (the one filed in 2021). 

Normally, you have to itemize on Schedule A to get a tax break for charitable donations. In this case, though, it’s the other way around—if you itemize, you can’t take this new deduction.

If you itemize on Schedule A of your tax return, you can claim a deduction for your charitable donations. Previously, the amount you can deduct for cash contributions was limited to 60% of your adjusted gross income (AGI). Any cash donations over that amount would be carried over for up to five years and deducted later.

The CARES Act lifts the 60% of AGI limit for cash donations made in 2020. The 100% of AGI limit on all charitable contributions still remains. That means tax payers that itemize can deduct more of their charitable cash contributions this year, which will hopefully boost charitable giving.

As with the new above-the-line deduction, donations to donor advised funds and supporting organizations don’t count.

You can read the text of the bill here.

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