After the tax reform law in 2017, which almost doubled the standard deduction filers may take, the number who Americans claim an itemized deduction for charitable donations dropped sharply. The law also set off a decline in charitable donations by individuals. Now that the coronavirus crisis upon us, we are going to be needing the help of nonprofits like Giving Center, food pantries, churches, and other charitable organizations to climb our way back to normal. The recently enacted government stimulus bill, the “CARES Act”, provides some additional tax benefits for donors in order to encourage more charitable giving in 2020. This makes it a lot easier to give and save at the same time.
Standard Deduction and the $300 Above-the-Line Deduction
Are you planning on taking the standard deduction on your 2020 tax return? If you do, you can claim a brand new “above-the-line” deduction of up to $300 for any cash donations to charity you give this year. However, donations to donor-advised funds and some organizations that support charities are not deductible. Usually, you are required to itemize on Schedule A to get a tax deduction for charitable donations. In this case, it’s the other way around — if you itemize, you can not take this new deduction.
Not sure if you will ll claim the standard deduction? Here are the amounts for a 2020 tax return:
2020 Standard Deduction Amounts
Taxpayers who are 65 years and older or blind may claim an additional standard deduction of $1,300; $1,650 if using the single or head of household filing status. For those who are both 65 and blind, the additional deduction amount is doubled.
Filing Status Standard Deduction:
- Single; Married Filing Separately-$12,400
- Married Filing Jointly-$24,800
- Head of Household-$18,650
60% of AGI Limit Waived with An Itemized Deduction
If you choose to itemize on Schedule A of your tax return, you may claim a tax deduction for your charitable donations. However, the amount you can deduct for a cash donation is usually limited to 60% of your adjusted gross income (AGI). Cash donations over that amount are able to be carried over for up to five years and deducted later.
The CARES Act effectively lifts the 60% AGI limit for all cash donations made in 2020. Keep in mind, there is still a 100% AGI limit on all charitable contributions. What that means is itemizers are able to deduct more of their charitable cash contributions this year, which will hopefully, in turn, boost charitable donations. It is the same as with the new above-the-line deduction, donations to donor-advised funds and supporting organizations don’t count.
Visit the Giving Center online to find out all the ways you can donate and make change happen.
