CARES Act new incentives for charitable contributions
To encourage more charitable giving in 2020, the recently enacted the “CARES Act” provides some
additional tax relief for donors. This makes it easier to give and save at the same time. If you take the
standard deduction on your 2020 tax return (the one that you’ll file in 2021), you can claim a brand new
“above-the-line” deduction of up to $300 for cash donations to charity you make this year. 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.
However, the amount you can deduct for cash contributions is generally limited to 60% of your adjusted
gross income (AGI). Any cash donations over that amount can 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 (although
there’s still a 100% of AGI limit on all charitable contributions). That means itemizers can deduct more of
their charitable cash contributions this year.
This statement is provided as information only and is not to be considered tax advice. Please consult
with your tax advisor for appropriate guidance.