2020 New “Universal” Deduction for Charitable Contributions

As clients look for last-minute tax-saving strategies in 2020, one area that should be considered involves the changes to the charitable giving rules made by the 2020 CARES Act.

The CARES Act established a ‘universal’ provision that allows you to deduct non-itemized, above-the-line charitable contributions. It is universal because it can be taken by all tax filers, regardless of itemized or standard deduction. So even taxpayers who do not itemize can benefit in 2020 from a charitable deduction.

What is this new universal deduction?

The CARES Act, among other coronavirus relief efforts, has a provision allowing people to deduct $300 for charitable contributions. The $300 limit applies per tax-filing unit, so for those who file married filing jointly, the maximum above-the-line deduction is $300. Taxpayers can take this universal deduction no matter whether they itemize or take the standard deduction on their taxes.

Contributions must be in cash (including checks and credit card payments) and given to a 501(c)(3) public charity. Contributions to non-operating private foundations, support organizations, and donor-advised funds are excluded under this new deduction. As a universal above-the-line deduction, you can list your contribution as an adjustment to income on your taxes.

In summary, with the CARES Act, if you donate up to $300 in cash to a qualified organization, your adjusted gross income will be reduced up to $300.

While a universal deduction is something charities have been seeking for many years, this provision is far from their ideal solution (charities have been seeking a universal deduction in the thousands of dollars).  Nonetheless, $300 could help many charities, especially in these trying times.

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