Can You Take Advantage of 2020 CARES Act Tax Benefits?
Can you take advantage of 2020 CARES Act tax benefits?
Have you been keeping up with Coronavirus legislation? Don’t worry, we read the text so you don’t have to. Within the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act lies a hard to find, one-time tax benefit, for individual charitable donations. And let’s face it, the IRS doesn’t give us many of these!
Prior to the CARES Act, only taxpayers that itemized deductions (versus choosing the standard deduction) on their tax returns were able to get a tax reduction from a charitable donation. But with the recent changes enacted tax laws only about 14% of all national taxpayers now itemize on their return. Therefore, most taxpayers don’t really have a tax-savings incentive to contribute to a charity.
What tax benefits are in the CARES Act?
This new CARES Act policy opens charitable tax deductions for everyone! For the first time, individuals can deduct up to $300 for cash donations to qualified charities even if they don’t itemize on their returns.
While $300 isn’t a lot of money (many lawmakers wanted more), the benefit here is that the 2020 CARES Act allows this donation to be an above-the-line deduction. This means a deduction that is subtracted from gross income to determine adjusted gross income. Above-the-line deductions are preferred over below-the-line deductions since it’s like you simply earned less money (and owe less in taxes) from the IRS’s perspective.
Is there anything else to know about these tax benefits?
There are some additional considerations to consider. This must be a cash donation, and you’ll still need to keep receipts for instance. And there are additional benefits for taxpayers that do itemize deductions on their returns. To make sure that you’re making the most out of this and any other opportunities lurking in the text of tax law, we recommend reading up on the IRS policy on charitable giving and speaking to your financial or tax advisor.
Calendar year 2020 is closing out soon. Now, more than ever, there is likely to be a charity somewhere that would very much appreciate it if we all would take advantage of this one-time tax-reducing strategy for year’s end!