Call or Text: 858-923-4500
Certified Financial Planner in Ramona and San Diego | Fiduciary Advice | Retirement Planning and Investment Management
  • Home
  • Services
    • Our Process
  • Why Us
    • Our Fiduciary Oath
  • Resources
    • Blog
    • Press
    • eBooks
    • Newsletter
  • Contact Us
  • Get Started
  • Client Portal
  • Menu

Donating to Your Favorite Charity This Holiday Season? Keep This CARES Act Tax Benefit in Mind

December 16, 2020/in Uncategorized /by admin

As Americans, we love giving back. In 2017 alone, we shelled out $410.02 billion in charitable donations – accounting for 2.1 percent of the GDP.1 With the 2020 holiday season officially upon us, it’s no surprise that our giving efforts are likely ramping up. And while donating to charities is an integral component of your core values, it can also be an important, strategic play in lowering your tax obligation.

This year, charitable contributions can count even more toward lowering tax bills for some. Thanks to the CARES Act, which passed in late March 2020 amidst the coronavirus pandemic, your giving could stretch even further this tax season.

How Is This Year’s Charitable Contribution Exemption Different?

Thanks to the CARES Act, filers will be allowed to take a $300 above-the-line charitable giving deduction.2 This is significant because, typically, you would have to itemize deductions in order to deduct charitable donations from your taxes.

With changes introduced through the CARES Act, this above-the-line deduction can be used for those who choose to take the standard deduction. As a reminder, the standard deduction for 2020 is $12,400 for single and married filing separately, $24,800 for married filing jointly and $18,650 for head of households.3

It’s important to note that the $300 limit is per filing unit, whether your filing single or jointly.

Who Does This Change Benefit?

This CARES Act exemption is not available for those who itemize their deductions, it’s only for those who are using the standard deduction on their 2020 tax returns.

This is significant because, historically, anyone taking a standard deduction has not been able to reduce their adjusted gross income (AGI) by claiming charitable contributions.

Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify for this new tax deduction. In tax-year 2018, the most recent year for which complete figures are available, more than 134 million taxpayers claimed the standard deduction, just over 87% of all filers, according to the IRS.

What Donations Count Toward the CARES Act Deduction?

Just as any other charitable contribution deducted from your taxes, eligible donations must be made to qualified 501(c)(3) organizations or any other qualified organization as outlined in section 170(c) of the Internal Revenue Code.2

What About Regular Charitable Contributions?

In the past, those who itemize their deductions were able to deduct up to 60 percent of their AGI in charitable contributions. Those who are extremely philanthropic may be interested to know that this limit has been raised to 100 percent.4

If you were so inclined to do so, you could donate all of your income and deduct 100 percent of it – leaving you with a $0 tax bill.

This relief benefit is more subtle than other aspects of the CARES Act, but it can still provide financial relief to families. This change gives families and individuals an opportunity to lower their AGI without needing to itemize deductions – something that low- to moderate-income families may not typically do. It incentivizes Americans to give charitably this season, which is especially important at a time when so many people and organizations are in need.

  1. https://www.charitynavigator.org/index.cfm?bay=content.view&cpid=42
  2. https://www.congress.gov/bill/116th-congress/house-bill/748/text
  3. https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2020#:~:text=For%20single%20taxpayers%20and%20married,tax%20year%202020%2C%20up%20%24300.
  4. https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
Share this entry
  • Share on Facebook
  • Share on Twitter
  • Share on WhatsApp
  • Share on Pinterest
  • Share on LinkedIn
  • Share on Tumblr
  • Share on Vk
  • Share on Reddit
  • Share by Mail
https://woodsonwm.com/wp-content/uploads/2020/12/featured-donating-to-your-favorite-charity-this-holiday-season_-keep-this-cares-act-tax-benefit-in-mind.jpg 1000 1400 admin https://woodsonwm.com/wp-content/uploads/2020/07/logow.png admin2020-12-16 19:01:362020-12-14 19:33:03Donating to Your Favorite Charity This Holiday Season? Keep This CARES Act Tax Benefit in Mind

Recent Posts

  • Have You Reevaluated Your Insurance Coverage Since COVID Began? If Not, Here Are 4 Areas to Review Right Now
  • 3 Financially Savvy Ways to Spend Your Tax Refund Amidst COVID-19
  • Former Client Re-Introduction
  • Small Business Tax Opportunity
  • 3 Things to Consider for your 2021 Taxes

Categories

Archives

  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020

Follow us on Facebook

Woodson Wealth Management is a fee-only, financial advisory firm dedicated to helping you continue to do what you love to do with ZERO financial stress.
Home
Services
Why Us
Contact Us
Privacy Policy
Website Disclosure
Firm ADV
Client Relationship Summary (CRS)
 Email us: info@woodsonwm.com
 Call or text: 858-923-4500
 Office: 760-566-8533
 Ready?: Schedule A Call

© 2021 Woodson Wealth Management and Consulting Inc. All rights reserved.

Who’s Ready to Say Goodbye to 2020? Ring in the New Year With These 3 Budgeting... The Housing Market Could Be Heading For a Decline in 2021. Is Now the Time to...
Scroll to top