New $300 Universal Charitable Deduction

To help alleviate the economic devastation caused by the coronavirus (COVID-19) pandemic, Congress has enacted the Coronavirus Aid Relief and Economic Security Act (CARES Act). Among its many provision is a brand-new universal deduction for charitable contributions. Taxpayers who don’t itemize may now deduct up to $300 per year in charitable contributions. Such deductions must be: in cash (no property like old clothing or food), and given to a 501(c)(3) public charity, like Metro Relief

No Annual Limit on 2020 Charitable Deduction by Itemizers

Under the TCJA, taxpayers who do itemize their deductions may deduct charitable contributions up to only 60% of their adjusted gross income (AGI). Any contributions over this amount must be deducted in future years. For example, if your AGI is $100,000 you may deduct no more $60,000 in charitable contributions; so if you contribute $70,000, the extra $10,000 must be deducted the next year. For 2020 only, the CARES Act allows itemizers to deduct contributions up to 100% of their AGI. Thus, for example, if your AGI is $100,000, you may deduct $100,000 in charitable contributions and wipe out your income tax liability entirely.

Contributions by Corporations

Under the TCJA, the annual charitable deduction by a corporation is generally limited to 10% of taxable income, while a 15% limit applies to charitable contributions of food. The CARES Act increases these amounts to 25% of taxable income for 2020. Donations in excess of 25% may be deducted in the following five years.