CARES Act provides significant incentive for donating to charity in 2020
On March 27, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Phase 3 COVID-19 emergency relief bill aimed at providing much-needed assistance to individuals, small businesses and not-for-profit organizations.
One item of particular interest in the CARES Act provides generous benefits to donors for the remainder of 2020. Section 2205 lifts the existing cap on deductions for annual cash contributions for those who itemize, raising it from 60% of adjusted gross income (“AGI”) to 100%. For corporations, the legislation raises the annual limit from 10% of the corporation’s taxable income to 25%.
This important provision is intended to encourage charitable giving during a time when many organizations are experiencing significant concern with future donations.
For example, a taxpayer who has $1 million of AGI for 2020 and makes a $1 million contribution to a public charity in the same year is allowed to take a charitable contribution deduction of the full $1 million for this year only. Previously, the income tax deduction would be limited to $600,000.
It should be noted that the higher AGI limit applies only to contributions made directly to public charitable organizations, and not contributions to donor advised funds, supporting organizations or private foundations.
Mazars Insight
While much of the CARES Act discussion has been focused on the Paycheck Protection Program, this key component of the act provides a significant incentive for charitable donations for donors who itemize, to increase their giving throughout the remainder of 2020. Organizations should proactively ensure that donors are aware of this added benefit, as this can provide a welcome increase in funding to organizations, especially those struggling due to the devastating virus.
Please contact your Mazars USA LLP professional for additional information.
Published on April 8, 2020
The information provided here is for general guidance only, and does not constitute the provision of tax advice, accounting services, investment advice, legal advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers.
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