Fortunately, a key provision of this year’s COVID relief legislation provides an extremely attractive incentive to support charitable organizations.
For individuals who itemize, consider making additional charitable contributions through December 31, 2020, because the CARES Act lifts the existing cap on cash contributions, raising it from 60 percent of adjusted gross income (“AGI”) to 100 percent through the end of 2020. It raises the annual limit from 10 percent to 25 percent of the corporation’s taxable income for corporations.
For example, consider an individual who has $10 million of AGI and makes a $10 million cash contribution to a public charity in 2020. Previously, the income tax deduction was limited to $6,000,000. For donations made in 2020, new legislation enacted this past March (the CARES Act) allows a charitable contribution deduction for the full $10 million. Note the higher AGI limit applies only to contributions made directly to public charities and not to other charitable entities such as donor-advised funds, supporting organizations, or private foundations.
With proper planning, there is still time left in 2020 to take advantage of this benefit. There has never been a better time to give.