Tax Benefits

On March 27, the president signed into law the Coronavirus Aid, Relief and Economic Security (CARES) Act. The $2 trillion legislative package to combat the coronavirus pandemic brings much needed economic relief to employers, employees and individuals impacted by the COVID-19 virus. This legislation made several changes to charitable contribution limitation rules for individuals and corporations.

INDIVIDUALS

  • Individuals who do not itemize their deductions can reduce their taxable income by making up to $300 in charitable cash contributions in 2020—and up to $600 for a married couple. This adjustment is made “above the line” and directly reduces the amount of income that is taxable. (Previously, there was no charitable contribution tax deduction available for taxpayers who did not itemize deductions.)
  • Individuals who itemize their deductions can deduct up to 100% of their adjusted gross income (AGI) for cash contributions to most 501(c)(3) organizations for 2020. The deduction was previously capped at 60% of AGI for cash contributions.

CORPORATIONS

  • Corporate donors may also make charitable contributions, and in 2020, corporations may increase their corporate tax deduction from 15% to 25% of taxable income.
  • Corporations that donate food inventory during 2020 may increase their charitable contribution deduction from 15% to 25% of taxable income.