With respect to tax-exempt charitable contributions, the CARES Act expands an individual donor’s adjusted gross income (AGI) limitation so that they may receive tax benefits from making larger charitable gifts. For those individuals not itemizing deductions, (a substantial majority of all individual taxpayers), they will be allowed in 2020 to deduct aggregate CASH contributions of up to $300 provided the contributions are made to churches or public charities other than donor-advised funds and or supporting organizations. Contributions to private foundations are not eligible for the $300 deduction. Even corporations were given greater incentives to make charitable gifts. In 2020, corporations may deduct aggregate contributions to public charities in an amount up to 25% of their taxable income without the deduction. This is an increase from the 10% limitation that applies to 2019 and to 2021.
For contributions made in 2020, individuals that itemize their deductions are able to take advantage of an increase in the AGI limitation for cash contributions to public charities. The AGI limitation for such charitable contributions is increased from 60% to 100% of the individual’s AGI for the year. The enhanced limitation applies both to gifts made directly by individual taxpayers and to those made indirectly through partnerships, LLCs and S corporations. All of an individual’s itemized deductions are subtracted from AGI in determining taxable income. While gifts to public charities, such as hospitals, community clinics, visiting nurse associations, medical research organizations (MROs), schools, churches, synagogues, museums, theatres, and performing arts companies qualify for the enhanced AGI limitation, gifts to donor-advised funds, supporting organizations, and private foundations do not qualify.
In this difficult time, we are happy to help you determine whether your organization’s donors are eligible for the $300 deduction for 2020, the enhanced 100% AGI limitation for individuals that make gifts in 2020, and the enhanced corporate taxable income limitation. Note that the enhanced AGI limitation should be considered by your donors in conjunction with their individual tax advisors. We are also able, to assist you and your development staff with contributions of property, and in particular, the rules about an enhanced limitation for certain contributions of food inventory.