We are deeply appreciative of your commitment to GRACE during these times and want to share how some of the legislation in the new CARES Act may help you deduct your gifts to support our programs and services.
GRACE is designated as a 501(c)(3) charitable organization by the Internal Revenue Service. We rely on the support of people in our community–like you–who believe in our mission to provide assistance to those in need, and guide them to self-sufficiency.
In addition to its many stimulus components, the CARES (Coronavirus Aid, Relief, and Economic Security) Act expands the charitable deduction to all taxpayers for a year, and boosts tax incentives for corporate giving, according to nonprofit analysts.
Currently, only people who itemize their taxes can claim charitable deductions. The CARES Act allows non-itemizers to deduct up to $300 in cash giving for the 2020 tax year, according to an analysis of the legislation by the National Council of Nonprofits.
Nonprofits have long sought a “universal deduction,” especially since the 2017 Tax Cuts and Jobs Act (TCJA) roughly doubled the standard deduction and sharply reduced the number of people who itemize their taxes.
The CARES Act lets non-itemizers take up to a $300 ($600 for a married couple filing jointly) above-the-line charitable income tax deduction for cash donations made in 2020. So for those who take the standard deduction, a $300 gift to charity would gain a $300 tax break in addition to the standard deduction ($12,400 for individuals and $24,800 for married couples).
An “above the line” adjustment to income reduces a donor’s adjusted gross income, and thereby reduces taxable income. To be eligible for the deduction, you would have to give a donation to a qualified charity like GRACE. If you have already made a donation this year (since January 1, 2020), that contribution counts toward the $300 cap.
For those who itemize, the CARES Act allows individuals to deduct donations up to 100% of their 2020 adjusted gross income (up from 60% previously). Especially generous donors can reduce their 2020 federal income tax to zero and those who are even more generous can carry forward unused cash contributions up to five years.
For corporate charitable giving, the CARES Act raises the annual limit from 10% to 25% of taxable income. The cap on deductibility of food donations from corporations would increase to 25 percent of taxable income, up from the current 15% cap.
The summary of the CARES Act said that the new $300 tax break would apply just for 2020, but the text of the bill (as passed and signed into law) says that it applies to tax years “beginning in 2020”. That’s a big victory for charities: It sets a precedent for possibly even expanding it with a higher cap—or no cap.
This is the first time Congress has passed this type of giving incentive in response to disaster or national emergency, providing a w
ay for both agencies like GRACE and the generous donors who support them to benefit.
Further, the inclusion of an expanded charitable giving incentive is a critical acknowledgement by Congress that the work of nonprofits like GRACE are essential services.
This information is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. References to tax rates include federal taxes only and are subject to change. State law may furt
her impact your individual results.