1. $300 CHARITABLE DEDUCTION FOR NON-ITEMIZERS
This is an above-the-line federal deduction available to every taxpayer claiming the standard deduction starting with the 2020 tax year. A donor may make a CASH gift and deduct up to the first $300 of that gift from his or her income. She can claim the standard deduction AND claim up to $300 for this special charitable deduction. Taxpayers who itemize–projected to be just 13.7% of all taxpayers in 2019 by the Tax Foundation–are not eligible to also claim the $300 deduction.
Here’s some practical FAQs:
Who would most likely BENEFIT from this deduction?
- Monthly donors, and
- Possibly donors giving less than $10,000 each year.
Who would most likely NOT BENEFIT from this deduction?
- Donors who give from their donor-advised fund or private foundation;
- Donors who give appreciated property like stock or mutual funds; and
- Donors giving $10,000 or more each year.
2. CASH GIFT INCENTIVE FOR ITEMIZERS
Only for the 2020 tax year, donors who itemize deductions on their federal personal taxes can now deduct charitable CASH gifts up to 100% of their adjusted gross income. Prior to the CARES Act, donors could only deduct cash gifts up to 60% of their adjusted gross income.
Who would likely BENEFIT from this deduction?
- Wealthier/high income donors who want to make a major gift and reduce or eliminate their 2020 tax bill;
- Donors who want to accelerate existing pledges to public charities.
3. INCENTIVES FOR CORPORATIONS
Prior to the CARES Act, a corporation could generally deduct CASH gifts up to 10% of its taxable gross income. For 2020, corporations may deduct CASH gifts up to 25% of their taxable income.
Remember: Many small businesses are corporations. Entrepreneurial donors may be able to take advantage of both the personal cash gift incentive as well as their business take advantage of the corporate incentive.