A New Tax Provision May Benefit Smaller Donors

Updated: Nov 29, 2020

The CARES act that brought us the economic stimulus checks in the spring includes a tax provision that may benefit you. The Act established a universal provision that allows you to deduct non-itemized, above the line charitable contributions. What does this mean? What is the limit? How can you use it? Read on to find out.

Generally, charitable contributions can only be a deduction if you itemize your personal deductions, instead of taking the standard deduction. The Tax Cuts and Jobs Acts (TCJA) that went into effect in 2018 and nearly doubled the standard deduction changed the way many people do their taxes.

But the CARES Act has instituted a provision that allows people to deduct $300 for charitable contributions. Taxpayers can take this universal deduction whether they itemize OR take the standard deduction on their taxes.

There are a few other things to know:

  • If you are married and filing jointly, your deduction is still limited to $300.

  • Deductions under the CARES Act must be cash (including check and credit card payments) and given to a 501(c)(3) public charity.

  • You can list your contribution as an adjustment to income on your taxes, reducing your adjusted gross income up to $300.

  • You don’t need to include documentation when you file gifts of $250 and under (be sure to keep proof of cash receipts)

  • All gifts exceeding $250 need to include the receipt or proper documentation when filing

In short, with the CARES Act, if you donate up to $300 in cash to a qualified organization, your adjusted gross income will be reduced up to $300.

As alway, it is recommended that you consult with your accountant or tax professional to make sure this strategy works for you.

Make your year-end donation to Healing to Healthy here.

Here is a link towhat the IRS says about the CARES Act:

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