On March 27, 2020, 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 during the COVID-19 pandemic. This legislation made several changes to charitable contribution limitation rules for individuals and corporations.
It is important to note that donations to the following types of charitable entities are excluded from the changes:
- Supporting organizations
- Donor-advised funds
- Most private foundations (except private operating foundations and a few others)
INDIVIDUALS
- The CARES Act permitted taxpayers who do NOT itemize their deductions to claim up to a $300 charitable deduction in arriving at adjusted gross income for 2020 only, provided the contribution were paid in cash to a public charity. The bill extends this provision to 2021, but increases the deduction to $600 for a married couple filing jointly.
- The CARES Act temporarily increased the limitation for deductible cash contributions to a public charity from 60% to 100%. The bill extends this treatment into 2021.
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.
- Eligible nonprofit organizations should act on this opportunity to communicate with their donors. Both new and existing donors may be inspired to support nonprofits through tough financial times, and these tax benefits can help encourage even small donors to give.
