Charitable Care Rises from the Lines of the CARES Act : 2020 : Articles : Resources : CLA (CliftonLarsonAllen)

The CARES Act offers taxpayers ways to capitalize on their charitable donations.

Tax strategies

Charitable Care Rises from the Lines of the CARES Act

  • Craig J. Ruffolo
  • Stephanie Petri
  • 4/20/2020

Key insights

  • The CARES Act permits individuals who do not itemize deductions to take an “above-the-line” deduction for “qualified charitable contributions” up to $300.
  • Filers who itemize deductions may deduct cash charitable gifts up to 100% of their adjusted gross income.
  • Corporations are now able to deduct charitable gifts up to 25% of their taxable income.

By its acronym, the CARES (Coronavirus Aid, Relief, and Economic Security) Act suggests the intent is to look out for others and care for them. Many people care about organizations they support as if they are an extension of themselves. These organizations inspire faith, represent hope for the future, and depend on our charitable contributions.

The CARES Act changes below can help you support the charities you cherish in 2020.

Reach out to CLA for more details

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Families and individuals

If you take the standard deduction

  • Previously, a pre-retirement age person claiming the individual IRS standard deduction of $12,400 ($24,800 for those filing jointly), would not be able to deduct charitable gifts. Charitable gifts made were presumed to be wrapped up in the standard deduction.
  • For the year beginning in 2020, individual filers who donate cash to charity may now deduct up to $300 in contributions “above the line” (before applying their standard deduction).

If you itemize deductions

  • Previously, cash charitable deductions for filers who itemize deductions were limited to 60% of adjusted gross income.
  • For contributions made during calendar year 2020, filers may deduct cash charitable gifts up to 100% of adjusted gross income. The increased limit does not apply to certain contributions, such as contributions to donor advised funds.

This means those with a lifestyle of giving can still give, even if their income is reduced this year – or give more if they are in the financial position to do so – while getting a current tax benefit for the contribution. The donation does not have to be related to COVID-19, but does need to be made during 2020 to qualify (i.e., contribution carryovers from prior years are not eligible for the higher deduction limit).

C corporations

  • The charitable deduction for a C corporations was previously limited to 10% of its taxable income (determined without regard to the charitable deduction).
  • For the first taxable year beginning after December 31, 2019, charitable contributions of cash in calendar year 2020 may be deducted in an amount up to 25% of taxable income.

Businesses

  • The charitable contribution deduction of apparently wholesome food was previously limited to 15% of the business’s taxable income (other limitations apply).
  • For the taxable year beginning after December 31, 2019, the deduction limit for donations of apparently wholesome food in calendar 2020 is increased to 25% of the business’s taxable income.

How CLA can help

Our goals-based financial planning process includes a step for quantifying resources to meet your goals. This can help uncover current income or future resources for the charitable purposes you already want to support.

Most taxpayers can benefit when their tax and wealth advisory professionals work together to deliver coordinated advice. At your direction, all of CLA’s professionals are ready to help you discover how to make the most of the recent government actions during this challenging year.

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  • Craig J. Ruffolo
  • Senior Wealth Advisor
  • CliftonLarsonAllen Wealth Advisors, LLC