Nonprofit organizations across the nation are desperately in need of support during the current COVID-19 pandemic. A new universal above-the-line tax deduction may give charitable giving a much needed boost.

Currently, only individuals who itemize their taxes can claim charitable deductions. Under the 2018 Tax Cuts and Jobs Act, the standard deduction was increased to such an extent that significantly fewer taxpayers now itemize deductions, and consequently, donations to nonprofits by those non-itemizing taxpayers no longer reduce their taxes. The Coronavirus Aid, Relief and Economic Security Act (CARES) Act, signed into law by the President on March 27, 2020, will now allow individuals to deduct up to $300 in qualified charitable giving if they are not itemizing (i.e. taking the standard deduction). Qualified contributions exclude non-cash donations as well as donations to donor-advised funds, private foundations and supporting organizations. Note that employer-sponsored disaster relief funds are excluded from the definition of donor-advised funds. And most importantly, this is not a temporary provision – it is effective for all taxable years beginning with 2020.

For 2020 only, there are also expanded charitable tax deductions for corporations and for taxpayers who both itemize and give more than 10 percent of their income to nonprofits. For those who itemize, the bill lifts the cap on annual giving from 60 percent of adjusted gross income to 100 percent. For corporate charitable giving, the bill raises the annual limit from 10 percent to 25 percent of taxable income. The cap on deductibility of food donations from corporations is increased to 25 percent of taxable income – up from the current 15-percent cap, which is welcome news for food banks.

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Donella Wilson

Donella Wilson, CPA, leads the Firm’s Nonprofit Practice and has 25 years of public accounting experience providing audit, accounting and special project services and works exclusively in the nonprofit sector. She is also President and Chief Philanthropy Officer for GHJ Foundation, the Firm’s…Learn More