The Cares Act 2020
A bright side for charities from The Cares Act
The CARES Act was passed on March 27, 2020 to help support our country economically during the Coronavirus Pandemic. Among many other provisions, the bill made changes to encourage charitable giving to nonprofits to recognize the important role we are playing in healthcare, social services, and education during this difficult time. Revisions to the Internal Revenue Code are intended to encourage charitable giving. As a result, your direct support of Hill Top this year can benefit you on your 2020 tax return. Here’s how:
$300 Above-the-Line Deduction (Must Take Standard Deduction)
Charitable deductions are back! If you take the standard deduction on your 2020 tax return (the one that you'll file in 2021), you can claim a brand new "above-the-line" deduction of up to $300 for cash donations to charity you make this year. That includes your support of Hill Top!
Donations to donor advised funds and certain organizations that support charities are not deductible. Normally, you have to itemize on Schedule A to get a tax break for charitable donations. In this case, though, it's the other way around—if you itemize, you can't take this new deduction.
60% of AGI Limit Waived (Must Itemize)
If you itemize on Schedule A of your tax return, you can claim a deduction for your charitable donations. However, the amount you can deduct for cash contributions is generally limited to 60% of your adjusted gross income (AGI). Any cash donations over that amount can be carried over for up to five years and deducted later.
The CARES Act lifts the 60% of AGI limit for cash donations made in 2020 (although there's still a 100% of AGI limit on all charitable contributions). That means itemizers can deduct more of their charitable cash contributions this year, which will hopefully boost charitable giving. As with the new above-the-line deduction, donations to donor advised funds and supporting organizations don't count.
Corporate & Business Limits Increase, as well!
For corporations, The CARES Act raises the annual deduction limit for eligible charitable contributions from 10% to 25% of their taxable income. This means that your company’s gift to Hill Top this year can help save on federal income tax.