Due to COVID-19 and the CARES Act, donors can give more and save more.
In addition to relief for small businesses and organizations, the CARES Act brings changes to charitable contributions tax laws for 2020. The changes benefit taxpayers who itemize and those who don’t.
According to section 2204 of the CARES Act, taxpayers who do not itemize, and therefore would normally not be allowed to take a deduction for charitable contributions, will be able to take a limited deduction.
For those of you who itemize, there is no limit this year to the deductions you can take for charitable contributions, if they are itemized. This new law can be found in section 2205 of the CARES Act. Previously, you could deduct up to a maximum of 60% of your adjusted gross income (AGI). With the new law, the maximum deduction for 2020 is 100% of the adjusted gross income. This means that if your AGI is $500,000, for example, and you donate $500,000 to qualified organizations, you won’t have to pay taxes on your income. If you donate more than 100% of your income, the excess can be deducted over five years.