How the CARES Act Impacts Charitable Giving
The Coronavirus Aid Relief and Economic Securities Act, also known as the CARES Act, is the third COVID-19 related bill enacted by Congress being preceded by the Coronavirus Preparedness and Response Supplemental Appropriations Act and the Families First Coronavirus Response Act. The CARES Act includes significant tax relief and charitable giving benefits.
What are the Federal income tax deductions for charitable contributions included in the CARES Act?
The CARES Act makes a new charitable deduction available to individual taxpayers that do not itemize their deductions. This new benefit, also referred to as a universal deduction, allows for a charitable deduction of up to $300 per individual. This is an above-the-line contribution that is deducted from the individual taxpayer’s income prior to the calculation of their adjusted gross income. This is the one charitable giving benefit that will extend beyond the 2020 tax year.
In addition to the new universal deduction, for 2020, the Act provides incentives for both individuals and corporations by increasing the available deductions on qualified charitable contributions to:
- 100% of their adjusted gross income for individual taxpayers who itemize their deductions. Beyond the scope of the CARES Act, the deduction for qualified charitable contributions made by itemizing individual donors is limited to 60% of their adjusted gross income.
- 25% of taxable income for corporations. Up from the 10% limit which is generally applicable for corporations outside of the CARES Act.
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