The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) increased the incentives for individuals and corporations to donate to 501(c)(3) nonprofit organizations.
Deductions for Cash Contributions
Specifically, Section 2204 provides for a one-time above-the-line (ATL) deduction (a direct deduction off of your gross income) for cash contributions up to $300 made to qualifying charities during the 2020 tax year. This is available to individuals who itemize and to those who take the standard deduction. Non-cash gifts or gifts to donor-advised funds do not apply for purposes of this ATL deduction.
No Limitations on Charitable Deductions for Individuals
Section 2205 suspends the limitation placed on charitable deductions for individuals that itemize. Typically, an individual’s charitable deduction is limited to, at most, 60% of their adjusted gross income (AGI). Suspending this limitation allows individuals to deduct donations that would otherwise exceed the AGI caps. Any amount contributed that exceeds AGI may be carried forward and treated as a charitable deduction for up to the next 5 successive tax years, subject to the typical charitable contribution limitations.
Higher Limits for Corporate Contributions
Section 2205 also raises the corporate contribution limitation from 10% of AGI to 25% for tax year 2020. Similar to the individual deduction, if the contributions exceed the amount able to be taken, the excess may be carried over and used as a charitable contribution deduction for the next 5 successive tax years, subject to certain conditions and the 10% limitation. Further, the limitations on contributions of corporate food inventory is also increased from 15% to 25% for tax year 2020.
If you have any specific questions about how these changes may affect you, your business, or your nonprofit organization, please reach out to the Woods Rogers Nonprofit Organizations Team.