After the 2017 tax reform law, which nearly doubled the standard deduction, the number of Americans claiming the itemized deduction for charitable gifts dropped sharply (as predicted). The law also triggered a decline in charitable donations by individuals (again, as predicted). But with the coronavirus crisis upon us, we're going to need help from churches, food pantries, and other charitable organizations more than ever to climb our way back to normal. To encourage more charitable giving in 2020, the recently enacted government stimulus bill (the "CARES Act") provides some additional tax relief for donors. This makes it easier to give and save at the same time.
For more ways the CARES Act can boost your financial health, see 11 Ways the Stimulus Package and Other Government Measures Could Help You in 2020.
$300 Above-the-Line Deduction (Must Take Standard Deduction)
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. 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.
Not sure if you'll claim the standard deduction? Here are the amounts for your 2020 tax return:
2020 Standard Deduction Amounts
| Filing Status | Standard Deduction |
|---|---|
| Single; Married Filing Separately | $12,400 |
| Married Filing Jointly | $24,800 |
| Head of Household | $18,650 |
Taxpayers who are at least 65 years old or blind can claim an additional standard deduction of $1,300 ($1,650 if using the single or head of household filing status). For anyone who is both 65 and blind, the additional deduction amount is doubled.
Sponsored Content
(opens in new tab)
60% of AGI Limit Waived (Must Itemize)
If you itemize on Schedule A (opens in new tab) 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.
Sponsored Content
(opens in new tab)
-
-
Investing Portfolio Peace of Mind, Now and in Retirement
The stock market soars, and then it takes a nosedive. When it does, remember: Disciplined investors will do best.
-
10 Things to Know About Hurricane Insurance Claims
Becoming a Homeowner Hurricane damage? Know what’s covered, what isn’t, and how to make the most of your policy if you need to file a claim.
-
State "Stimulus Checks" Are a Thing in 2022 – Will You Get One?
To help counter high inflation, pandemic woes and other financial hardships, some states are sending tax rebate "stimulus" checks or other payments to residents.
-
Tax Deadlines Extended for Hurricane Ian Victims in Florida
Certain tax filing and payment deadlines are extended for residents and businesses in Florida impacted by Hurricane Ian.
-
Reminder: The Penalty Tax Refund Deadline Is This Week
Tax Breaks People hit with late-filing penalties during the pandemic could be getting a tax refund from the IRS – if they act now.
-
Alaska Natural Disaster Victims Get Tax Relief from IRS
Upcoming tax filing and payment deadlines are extended for residents and businesses impacted by the recent storm, flooding and landslides in Alaska.
-
Hurricane Fiona: Tax Relief Available for Puerto Rico Victims
Tax Breaks FEMA's recent disaster declaration opens the door for extended federal tax filing and payment deadlines for victims of Hurricane Fiona in Puerto Rico.
-
The Federal Tax Credit for Electric Vehicle Chargers is Back
Tax Breaks The Inflation Reduction Act revives the federal tax credit for electric vehicle charging stations and EV charging equipment that had expired in 2021—with a few changes.
-
Big Changes to the Saver's Credit Could Be on the Way
Tax Breaks Congress is considering legislation that would turn the Saver's Credit into a government match to your retirement plan contributions.
-
Arizona Storm Victims Get More Time to Pay Taxes
Tax Breaks Certain tax filing and payment deadlines are extended for residents and businesses impacted by the recent severe storms in Arizona.
