Typically, charitable contributions can only be a deduction for income tax purposes if you itemize your personal deductions, rather taking the standard deduction. If you don’t itemize, historically, you’re out of luck — and the Tax Cuts and Jobs Act (TCJA) made this process a much more difficult feat. TCJA went into effect in 2018 and nearly doubled the standard deduction, eliminated personal exemptions, and eliminated several itemized deductions. For 2020, the standard deduction is $12,400 for those filing single and $24,800 for those married filing jointly. This surge precludes most Americans from being able to itemize their deductions. In fact, since TCJA, only 10% of taxpayers itemized deductions.
But, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act provided a change to the tax treatment of certain charitable contributions made in 2020, which may be beneficial to charities who have seen a significant decline in contributions. For 2020 income tax returns, taxpayers who don’t itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. For the purposes of this deduction, qualifying organizations are those that are religious, charitable, educational, scientific or literary in purpose. Just remember that cash contributions also include those made by check, credit card or debit card, but they don’t include securities, household items or other property.
The CARES Act also temporarily suspends limits on charitable contributions and temporarily increases limits on contributions of food inventory. More information about these changes is available on IRS.gov, or you can contact our office for more information at 410-571-8366.