CARES Act Offers Extra Tax Advantages for Giving This Year

By Joan Hoge-North & Mike DiPaolo
This article was featured in the Delaware Business Times Oct. 13, 2020.
This article has been edited to correct an error in an earlier version. The maximum above-the-line deduction is $300 for an individual, or $300 each for married couples filing separately.

While much of the government funding for coronavirus relief has been focused on helping individuals and businesses, several lesser-known provisions aim to stimulate philanthropy through increased tax incentives around charitable giving for both individuals and corporations . 

As you contemplate maximizing the impact of your year-end giving, consider taking advantage of these provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act
of 2020:

This year, taxpayers who do not itemize can deduct up to $300 in charitable giving “above the line,” reducing your taxable income by that amount for tax year 2020. Most taxpayers do not itemize and, therefore, do not typically benefit from charitable deductions, which can lower your adjusted gross income (AGI), thereby reducing your tax base. The CARES Act changes that for 2020, making it attractive for moderate-income individuals to help nonprofits with critical needs.

In 2020, taxpayers can deduct up to 100% of their AGI for charitable cash contributions, compared to the normal 60% maximum. And, if an individual or couple happens to donate more than 100% of their AGI, the standard five-year carryover still applies. If you are considering making a major gift, now is the time to make it happen for a significantly increased tax benefit.

Similar to individual taxpayers, corporations can deduct up to 25% of taxable income for charitable contributions in tax year 2020, compared to the usual 10%.

Of course, even these modest incentives come with a few strings attached. First, charitable contributions in all three situations are limited to cash contributions (no in-kind gifts, appreciate stock or other real property). Second, gifts to private foundations and donor advised funds, such as those held at the Delaware Community Foundation, are not eligible. However, gifts are eligible to other DCF funds, including scholarship funds, designated funds, nonprofit funds, and giving circles, such as the Fund for Women and the African American Empowerment Fund. 

Time is running out! All of these provisions end on Dec. 31. If you are associated with a nonprofit, make sure your donors know about these giving incentives. If you are associated with your corporate giving program, this is a great year to increase your charitable giving. And if you are able to dig deep and increase your personal giving this year, you will not only make a meaningful difference in your community during this year like no other, but also benefit from some tax savings,

For more information or assistance making a gift, contact us.

Tax information provided here is general and educational and should not be construed as legal or tax advice. Please consult your tax advisors before making major financial decisions.

Joan Hoge-North serves as vice president for philanthropy for the Delaware Community Foundation, while Mike DiPaolo serves as its vice president for Southern Delaware.