How the CARES Act changed deductions for charitable gifts
The massive relief package included a charitable deduction of up to $300 that taxpayers who choose to not itemize can claim at the end of 2020
The $2.2 trillion CARES Act passed by Congress in March provided coronavirus relief options to American workers and businesses, including new tax benefits for donors to non-profits.
The massive relief package included a charitable deduction of up to $300 that taxpayers who choose to not itemize can claim at the end of 2020.
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The standard deduction for individuals in 2019 was $12,200, which is what the majority of Americans opt for when filing their taxes (nine out of 10 taxpayers do not claim itemized deductions on their federal income tax returns).
The second change in the CARES Act lifted the cap on how much a donor can deduct in charitable gifts in a single year. Before the legislation passed, individuals could deduct gifts valued at no more than 60 percent of their adjusted gross income, with the excess deductible in future years.
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But under the CARES Act, a donor can fully deduct gifts equal to as much as 100 of their adjusted gross income for the full year. For businesses, the law increases the limit on deductions from 10 percent to 25 percent of their taxable income.
U.S. charitable donations surged to $449.6 billion last year, hitting one of the highest levels on record before the coronavirus pandemic struck American workers and businesses, according to a report released by Giving USA last week.
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It remains to be seen how the coronavirus pandemic affects charitable giving this year.
The 2017 Tax Cuts and Jobs Act, which substantially increased the size of the standard tax deduction, dealt another blow to charitable giving when it was signed into law. Because that deduction was so much bigger, more taxpayers opted for that option in lieu of claiming the itemized deduction for charitable contributions.