Not thinking about your 2020 taxes yet? Here’s one good reason why you should.
The CARES Act —the Coronavirus Aid, Relief, and Economic Security Act—is a $2.2 trillion stimulus plan passed by Congress in March. It changes some really important things about charitable giving that may impact how you donate to the Memphis charities you love.
Here are some key parts of the new incentives:
- If you take the standard deduction—You can take a one-time deduction of up to $300 ($600 for married couples) for donations to charities this year. It’s an “above the line” adjustment that actually reduces your taxable income. That’s only for 2020, though. So don’t put it off until next year, it may not be available.
- If you itemize your deductions—You get even bigger incentives. Changes to the tax laws several years ago limited charitable giving deductions to just 60% of your adjusted gross income, no matter how much you gave during the year. But thanks to the CARES Act, that limit has been lifted for 2020. That means you can deduct all of your donations up to 100% of your 2020 adjusted gross income! This applies to donations to public charities only, though, not to donations you make to private foundations or donor-advised funds.
- Corporations can give more too—Corporate giving makes up a large part of charitable gifts each year. The CARES Act increases the cap on how much corporations can deduct for the cash gifts they make in 2020 from 10% to 25%. The limitation on deductions for food donations was also increased from 15% to 25%.
This is the first time in history that Congress has passed this type of an incentive for charitable donations in response to a disaster or national emergency. It’s a clear statement that the work of our nonprofits is now more important than ever and the needs of our communities just keep growing.
There’s a lot of suffering Memphians right now, and you may be among them. But if you’re not – if you have the resources – now is a great time to take advantage of these new rules and give what you can to the nonprofits that are serving our most vulnerable.
Some amazing non-profits you can support right now (or learn more about) are listed here!
This information is not intended as legal or tax advice. You should always consult with an accountant or lawyer for tax or legal advice. References to tax rates include federal taxes only and are subject to change.