There is a new financial incentive for Americans to give generously to qualifying charities, including United Way of Central Georgia and the many program partners it supports. The new universal tax break for charitable donations was included in the final $2 trillion COVID-19 stimulus package signed into law this year and will go into effect starting with the 2020 tax year. The first change will make a $300 deduction for charitable gifts available to the nine in 10 taxpayers who do not claim itemized deductions on their federal income tax returns. The measure grants taxpayers an above-the-line deduction for up to $300 in charitable donations given in 2020.
Here is the tax benefit break down for those taking standard deductions, itemized deductions and corporate giving:
For people who take the standard deduction, the CARES ACT allows you to take a tax deduction for contributions made to qualified charitable entities up to $300 per year starting in 2020 – this deduction is “above-the-line.” The 2020 Standard deduction is $12,400 for individuals and $24,800 for married couples filing jointly. Therefore, any donation to qualifying charities of up to $300 will be added to the standard rate of deduction. For example, if you take the standard deduction and give $300 to charity, you will get a $300 tax break in addition to the standard deduction. This deduction applies for 2020 and beyond.
For people who file for itemized deductions, the CARES ACT allows you to take a tax deduction of up to 100% of your Adjusted Gross Income (AGI) for contributions to qualifying charities starting in 2020. The new law temporarily lifts the limits on charitable giving from 60% of a taxpayer’s AGI to 100% for 2020.
For corporate donors, the new law also increases the limit on the deduction for charitable contributions from 10% to 25% of a corporation’s taxable income.
As the year end nears, now is the perfect time for many taxpayers to take advantage of this new deduction.