By Preston Jones, CPA, Manager | Not-for-Profit Team
Not-for-profit organizations can benefit from charitable contribution incentives included in The CARES Act
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, to provide relief to both businesses and individuals around the country in response to the economic environment being left in the wake of the COVID-19 pandemic. Of particular interest to non-profit organizations are changes made to the tax effects of charitable giving in 2020.
Charitable Incentives for Individuals and Businesses
One of the effects of the 2017 Tax Cuts and Jobs Act was a significant increase in the value of the standard deduction, resulting in a substantial amount of taxpayers forgoing itemized deductions. As charitable contributions are an itemizable expense, a side effect of this change was removing some of the incentive individuals had to make charitable contributions. The CARES Act is reimplementing some of this incentive by allowing for up to $300 of cash contributions (or $600 for joint filers) to be an “above-the-line” deduction for those electing the standard deduction on their 2020 tax returns.
Additionally, for taxpayers electing to itemize deductions, the CARES Act removes the 60% of adjusted gross income (“AGI”) cap on deductibility of charitable contributions, allowing contributions up to 100% of AGI to be deducted. The ceiling on corporate deductions has also been raised, from 10% of taxable income to 25% of taxable income, providing tax savings for corporations as well.
Note that the new rules above are for contributions to public charities, not including private foundations, donor advised funds, and supporting organizations. The goal of these changes is that these new and increased deductions will provide for additional sources of revenue to non-profit organizations during these uncertain times. If you have questions about these new policies or other business matters related to COVID-19, please reach out to your Keiter service team or review Keiter’s COVID-19 knowledge library at the link below.
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.