Here’s how the CARES Act changes deducting charitable contributions made in 2020:
Whether taxpayers are supporting natural disaster recovery, COVID-19 pandemic aid or another cause that’s personally meaningful to them, their charitable donations may be tax deductible. These deductions basically reduce the amount of their taxable income.
Passed in late March, the federal government’s COVID-19 relief package includes $2.3 trillion worth of provisions to help mitigate the economic impact of the pandemic. Known as the CARES Act, the package includes appropriations for small businesses, individual taxpayers, hospitals and a variety of other groups. A little-known section of the act also offers new tax advantages for charitable giving.
Previously, charitable contributions could only be deducted if taxpayers itemized their deductions.
However, taxpayers who don’t itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. For the purposes of this deduction, qualifying organizations are those that are religious, charitable, educational, scientific or literary in purpose. The law changed in this area due to the Coronavirus Aid, Relief, and Economic Security Act.
The CARES Act also temporarily suspends limits on charitable contributions and temporarily increases limits on contributions of food inventory. More information about these changes is available on IRS.gov.
Here are some resources for people making donations:
Taxpayers must give to qualified organizations to deduct their donations on their tax return. They can use this tool to find out if a specific charity qualifies as a charitable organization for income tax purposes.
This publication explains how taxpayers claim a deduction for charitable contributions. It goes over:
- How much taxpayers can deduct.
- What records they must keep.
- How to report contributions.
Taxpayers generally can deduct the fair market value of property they donate. This publication helps determine the value of donated property.
Taxpayers must file Form 8283 to report noncash charitable contributions if the amount of this deduction is more than $500. The instructions for this form walk taxpayers through how to complete it.
Taxpayers deducting donations do so on Schedule A. The instructions for this form include line-by-line directions for completing it.
Taxpayers age 70 ½ or older can make a qualified charitable distribution from their IRA – up to $100,000 – directly to an eligible charity. It’s generally a nontaxable distribution made by the IRA trustee to a charitable organization. A QCD counts toward their minimum distribution requirement for the year.