The COVID CARES Act Rewards Giving!
Be sure to consult your personal tax advisor for how this may apply to your individual financial situation.
CARES Act Allows $300 Above-the-Line Charitable Donation Deduction
You’ve heard it over and over and over again: “We’re all in this together.” Just because it’s familiar doesn’t mean it isn’t true. Not only are we fighting the spread of COVID-19, we’re also joining ranks to support each other financially, especially through fundraisers and donations.
Because the federal government wants to help keep up the momentum of all this generosity, the CARES Act relief initiative now allows taxpayers to deduct up to $300 of our cash donations to qualifying organizations without having to itemize our deductions.
Usually, only those of us who itemize our deductions qualify for the charitable contribution deduction. This deduction reduces taxable income after our adjusted gross income (AGI) has been calculated on our tax returns. Again, usually, the deduction allows us taxpayers to deduct donations that are up to 60% of our AGI.
This new $300 deduction from the CARES Act, however, is designed specifically for those of us who don’t itemize our deductions and therefore would not get any tax benefit for our donations. In what is called an “above-the-line” deduction, the IRS applies it when calculating our AGI.
Put another way, if you donate up to $300 in cash to a qualified organization, your AGI will be reduced by up to $300 – and, you can still claim the standard deduction.
If you routinely itemize your deductions, you will still claim all of your charitable donations on Schedule A of your tax return. In that case, you would not be eligible for the $300 above-the-line donation.
If you are very generous with your charitable donations, the CARES Act affects the regular charitable contributions deduction, too. The Act has raised the limit for the deductible amount of donations for those who itemize their deductions – from 60% to 100% of AGI. Hypothetically, then, you could donate your entire year’s income and come away without owing any taxes.
This new tax deduction helps provide COVID-19 relief by giving any taxpayer, whether or not you itemize, a tax break for your generosity. This should be an incentive to us to give in 2020, when such gifts are needed most, and owe less taxes when we file them in 2021.
This deduction applies only to cash donations and only to gifts made to qualified 501(c)(3) organizations. As always, you should be careful where you send your donations.
Millions of us are coming together at this time to support each other through our philanthropic efforts. Like all other institutions, Asbury Seminary is being deeply affected by the advent of this coronavirus pandemic. We need your help now more than ever to fulfill our mission. While you are thinking about donating to worthy non-profit organizations, we hope that you will consider giving a gift to Asbury Seminary. It will not only benefit us – it will benefit you also.