Charitable Deduction Limits Increased for 2020 Tax Year; New Above-the-Line Deduction for Gifts Permitted
By: Matthew Rak, Esq.
Many business and community leaders have stepped forward to help those in need during the coronavirus (COVID-19) crisis. While these leaders are united by a common purpose of conquering adversity rather than the tax benefits of charitable giving, the CARES Act has relaxed many long-standing tax deduction limits for charitable giving. Just as the current economic environment has opened doors for strategic planning through Roth IRA conversions and lifetime gifting strategies, it has also created tax-saving opportunities for those motivated to help others.
Below is a table comparing new provisions under the CARES Act with prior law and notes regarding why those provisions are particularly timely. Note that these deduction limits are for Qualifying Charitable Contributions, typically meaning contributions to a public 501(c)(3) charity, and not those to an endowment, donor-advised fund, private foundation, or supporting organization.
Charitable Giving Under the CARES Act (2020 Tax Year)
|
Individual Income Tax |
Prior Law |
CARES Act |
Notes |
| Cash Contributions to Public Charity | Limited to 60% of AGI | No Limit | Deductible to 100% of AGI. This is particularly useful as many taxpayers may have reduced 2020 incomes which would lower the deduction ceiling. Cash gifts are also in vogue as appreciated securities are a rare commodity. Many donors may wish to harvest the tax loss and donate the cash. Taxpayers must still itemize to take this deduction. Cash contributions in excess of AGI may be carried forward five years. |
| Above-the-Line Deduction for Cash Contributions to Public Charity | NONE | $300 | For taxpayers who have not itemized deductions, they received no tax benefit as a result of charitable giving. Now, taxpayers who do not itemize can take advantage of a new, above-the-line deduction of up to $300 for amounts contributed to charity in 2020. |
|
Corporate Income Tax |
Prior Law | CARES Act | Notes |
| Cash Contributions to Public Charity | 10% of taxable income | 25% of taxable income | With many businesses expected to incur reduced taxable income for 2020, the former 10% limit would have hampered the ability to take a current deduction for charitable gifting. |
| Contributions of Food Inventory | 15% | 25% |
Should you have any questions regarding charitable deduction limits, please contact Matthew Rak or another member of the Leech Tishman Estates & Trusts Practice Group.
Matthew Rak is a Partner with Leech Tishman and a member of the Estates & Trusts Practice Group and Taxation and Energy Groups. He also is Chair of the Nonprofit Organizations Group. Matt is based in the Pittsburgh office and can be reached at 412.261.1600 or mrak@leechtishman.com.
Leech Tishman’s Facebook Page: https://www.facebook.com/leechtishman
Leech Tishman’s Twitter: https://twitter.com/LeechTishman
Leech Tishman’s Company Page on LinkedIn: https://www.linkedin.com/company/leech-tishman
Leech Tishman Fuscaldo & Lampl is a full-service law firm dedicated to assisting individuals, businesses, and institutions. Leech Tishman offers legal services in alternative dispute resolution, aviation & aerospace, bankruptcy & creditors’ rights, construction, corporate, employee benefits, employment, energy, environmental, estates & trusts, family law, government relations, immigration, insurance coverage & corporate risk mitigation, intellectual property, international legal matters, litigation, real estate, and taxation. Headquartered in Pittsburgh, PA, Leech Tishman also has offices in Chicago, Los Angeles, New York, Sarasota and Wilmington, DE.