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CARES Act Broadens Charitable Opportunities for Individuals and Corporations

Kristina L. M. Wildman
4/2/20

charity envelopes   The recently enacted CARES Act, or Coronavirus Aid, Relief, and Economic Security Act, included several changes to the availability of charitable deductions for American taxpayers. 

   Charitable contributions are typically referred to as “below-the-line” deductions and therefore are deductible by individuals who are able to itemize deductions.  The act provides for a $300 above the line deduction for cash contributions to public charities.   This deduction will apply only if you are unable to itemize your deductions (i.e., those who claim the standard deduction). 

   The act also increases the itemized deduction limitation for charitable cash contributions to public charities by an individual. An individual may now itemize qualified charitable contributions up to 100% of their adjusted gross income for the taxable year. This is an increase from the previous 60% threshold. If an individual exceeds the 100% adjusted gross income limitation in 2020, they may elect to carryover the deduction to the following five income tax years. It is important to note that the contribution must be in cash and must be to a public charity, not private foundations or donor advised funds. 

   Similarly, the act increased the itemized deduction limitation for corporations. Corporations can now take a charitable deduction for charitable cash contributions to public charities up to 25% of the corporation’s taxable income for the income tax year. This is an increase from the previous 10% threshold. If a corporation exceeds the deductible amount in 2020, they also may elect to carryover the deduction to the following five income tax years. Once again, this deduction only applies to cash contributions to public charities.  Additionally, the act also increased the allowable deduction for contributions of food inventory by businesses.  Presently, businesses, other than C corporations, may deduct contributions of food inventory up to a limit of 15% of the aggregate net income and a C corporation may deduct a contribution of food inventory up to 15% of its taxable income.  The act now provides that both of these limitations are increased to 25%.    

   Should you have any questions regarding this change in the tax deductions law, please contact Ms. Wildman.

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Disclaimers:

At the date of publication the above information was correct.  It is quite possible the information above has changed as COVID-19 is a rapidly evolving situation. 

The article in this publication has been prepared by Eastman & Smith Ltd. for informational purposes only and should not be considered legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney/client relationship.