CARES Act Provides Charitable Incentive to Help Charities While Also Helping Yourself

By Britt Erica Tunick

COVID-19 has wreaked havoc on charities and non-profits across the country –at a time when most of these organizations are needed more than ever and are facing increased needs from the people they serve. In an effort to incentivize individuals who are able to make charitable contributions this year, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) has raised the amount that individuals are able to deduct from the taxes for charitable donations.

Under the CARES Act, individuals who take the standard deduction can deduct up to $300 for charitable contributions made in the 2020 tax year, with that amount doubling to $600 for married couples. This “above the line deduction” will reduce your total taxable income, so if you were considering supporting any charities this year, it is an additional reason to do so. And the benefits are even higher for individuals who itemize deductions on their tax returns.

Through changes made as part of the Tax Cuts and Jobs Act of 2017, the charitable deduction was capped at 60% of an individual’s adjusted gross income. That cap has now been removed for 2020. Under the CARES Act, individuals who itemize their deductions will now be able to deduct all of the donations they make in 2020, up to 100% of their adjusted gross income, as long as the donations are made to public charities within the 2020 calendar year.

Given this change, you may also want to consider front-loading your giving and adding any contributions you would otherwise have made in 2021 to the amount you donate this year. The benefits of bundling donations are two-fold –it provides a larger amount of money to charities when they need it most and it also lowers what you will ultimately pay in taxes.