Get a Deduction Without Itemizing and Donate This Year!

By Associate Attorney Danielle Nodar
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With the holiday season upon us, many people are considering how they can give back to their communities, particularly after a year where many have been adversely impacted due to the longstanding impact of COVID-19. Like many industries and people, the pandemic has also taken a toll on nonprofit organizations. Revenue streams have been reduced due to limits on regular fundraising activities and economic hardships befalling individual or corporate donors. This strain on nonprofits is coupled with an increase in demand for many services provided by nonprofits, particularly those combating difficulties caused by the pandemic, such as food insecurity, homelessness, and elder and medical care.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides several provisions that increase tax incentives for charitable contributions by both individuals and corporations, which may be an added incentive for people to make gifts at a time when they may be most needed. The CARES Act provides that individual taxpayers who do not itemize their deductions can now deduct up to $300 for cash gifts made to public charities in 2020. Another bonus to this new change is that it will not expire this year unless the legislation changes; however, to take advantage of it this tax year, all cash or check gifts must be received or postmarked by December 31, 2020. Individuals who itemize their deductions may now deduct cash contributions to public charities up to 100% of their Adjusted Gross Income (AGI), an
increase from the 60% Adjusted Gross Income limit that used to apply before the CARES Act.

For both groups of people, these gifts must be made to a public and not private non-operating foundations, donor advised funds, supporting organizations or split-interest trusts such as charitable remainder trusts. Also, keep in mind, you must provide a receipt to show proof of cash gifts of $250 or more.

Finally, this spirit of giving is not limited to individuals as the AGI limit for cash charitable contributions was also increased for corporate donors with the changes made by the CARES Act. Corporate donors can now deduct up to 25% of their taxable income, an increase from the 10% in previous years.

In order to ensure that your charitable contribution is maximized, you should consult with your tax professional and attorney. For questions about how you can incorporate charitable giving in your estate plan, please contact Jesson & Rains!