CARES Act Allows for $300 Above-the-Line Charitable Giving Deduction

Key Points

• A measure in the federal coronavirus relief bill grants taxpayers an above-the-line deduction for up to $300 in charitable donations starting in 2020.

• Normally, you have to itemize deductions for a tax write-off for charitable donations. In this case, the break is available to people who claim a standard deduction, which is $12,400 for singles or $24,800 for married-filing jointly in 2020.

• The lower your tax bracket, the less of a benefit you get.

READ MORE ABOUT CARES ACT TAX BENEFITS BELOW 👇

How is the new $300 deduction different from the regular charitable contribution deduction?

Usually, only those who itemize their deductions qualify for the charitable contribution deduction. The deduction reduces taxable income after the donor’s adjusted gross income (AGI) has been calculated. (Your AGI determines eligibility for certain tax breaks.) The deduction also usually only allows taxpayers to deduct donations that are up to 60% of their AGI.

The new $300 deduction from the CARES Act, on the other hand, is specifically for those who don’t itemize their deductions and would typically not get any tax benefit for donations. Since it’s considered an above-the-line deduction, the IRS applies it when calculating your AGI.

In plain English, if you donate up to $300 in cash to a qualified organization, your AGI will be reduced by up to $300—and you can still claim the standard deduction.

Can you take the new $300 deduction if you itemize deductions?

No; if you itemize, you will still claim all of your charitable donations on Schedule A – no double-dipping or dividing here.

Does the CARES Act affect the regular charitable contributions deduction, too?

It does for those who are very philanthropic. The CARES Act raised the bar for the deductible amount of donations for those itemizing deductions, too – it’s now up from 60% to 100% of AGI, so (hypothetically) you could donate your entire year’s income and walk away with no taxes owed.

How does the new deduction help provide COVID-19 relief?

Providing tax benefits for those who claim the standard deduction means that any taxpayer, regardless of whether they itemize, can now get a tax break for their generosity.

This is a big deal, especially when you consider that the increased standard deduction brought about by Tax Cuts & Jobs Act of 2017 drastically reduced the number of taxpayers who qualify to itemized deductions.

It’s an incentive to give in 2020 and have less taxes owed when you file in 2021, so people are encouraged to help now, when it’s needed most.

Where can I donate?

Remember that the deduction only applies to cash donations made to qualified 501(c)(3) organizations, such as CRi. You can make your donation electronically HERE, or send a check to:

CRi - Attn: Philanthropy Team, 14160 Newbrook Dr, 1st Floor, Chantilly, VA 20151

Relief efforts like the new charitable deduction provided by the CARES Act are just a small part of a larger whole – millions of people are coming together virtually to support one another, and it’s a beautiful thing to see. The COVID-19 pandemic is a tragic, unpredictable event, but we will rise above it. 

Stay safe, stay healthy, and stay tuned for more tax news on the Coronavirus.

(Adapted from original article written by Susannah McQuitty, 1040.com)