Writing Off Charitable Contributions After COVID-19 | CPA Firm

Times have changed, and taxes have too. In a world where wearing a mask is common and, frequently, mandated, we can all see the differences COVID-19 has made. From closing businesses to skyrocketing unemployment numbers to new CDC guidelines for just about everything—Americans are learning to adjust and regroup. The new CARES Act is providing quick and impactful financial support for our economy. Chandler & Knowles, CPAs are educated and ready to help you with the changes regarding charitable contributions. 

What Is New?

With the influx of COVID-19 cases, the stock market was gravely influenced. In the wake of this downfall, many traditional givers pulled back their aid to strategize. Unfortunately, the loss of assistance couldn't have come at a worse time. The unemployment rate rose to an all-time high of 14.7% in April. Although it has dropped since then to 11.1% in June, the need for charitable giving is still high.

Typically, charitable contributions are only useful if an individual can itemize. With the increase in standard deduction in 2018, fewer people qualified for itemized deductions. The CARES Act signed into effect on March 27, 2020, addresses charitable contributions after COVID-19. Government officials realized the need to ramp up giving to those in need and made the following modifications for the tax year 2020:

• For those who itemize, the limit on charitable contributions is 60%. The new guidelines state a no limit deduction. So, if your AGI is $575,000, you can donate and claim up to $575,000, thus leaving you with no taxable income. If you give more than your AGI, you can carry the amount forward for up to five years. Donations must be cash gifts to IRS recognized charitable organizations.
• Regarding those who do not itemize, you are now able to claim up to $300 in charitable donation contributions. This change gives more incentive for generosity.
• Corporations can now claim 25% of taxable income in cash donations. Previously it was set at 10%.
• Food donations increased from 10% to 25% limits. Taxpayers can donate food to a local food pantry and claim it on their tax return. Restaurants can make higher donations up to 25% of taxable income for a more significant impact on those in food insecurity positions.

How Do I Claim My Charitable Contribution Deduction?

While the CARES Act does not specify how to make the election, assume that it will be on your 2020 tax return. Partnerships and corporations should have all parties involved to choose the election on their personal return. For the time being, these shifts in tax law only apply to the 2020 tax year. As always, it is best to discuss the deduction with a CPA to ascertain you stay within the confines of the law. 

With so many revisions in tax laws, taxpayers need to have a good understanding of the differences. Chandler & Knowles CPAs offer a wide variety of tax and accounting services complete with up to date tax changes. We strive to continually educate ourselves on new and innovative ways to help you save money. Contact us today to make an appointment to 'make life less taxing.'