CARES Act Increases Charitable Deductions

In an effort to encourage donations to nonprofits, the CARES Act has expanded the charitable deduction for both individuals and corporations.

Individuals that do not itemize on their 1040, can take a $300 above the line deduction for cash contributions made to a qualified organization.  The $300 deduction is both for individual returns and married filing jointly returns as it is based on the tax-filing unit, not per individual.  

Individuals that itemize can currently deduct charitable contributions of no more than 60% of their adjusted gross income (AGI).  The CARES Act removes the 60% limit so cash contributions may be deducted up to 100% of AGI for those that itemize.

Corporations are currently limited to a charitable deduction of 10% of their taxable income for the year.  The CARES Act increases this limit to 25%.  

In order to be deductible, the contributions must be made in cash to a qualified organization.  The contribution cannot be made to a donor advised fund or to a supporting organization.  To determine if a nonprofit meets the qualified organization definition for the CARES Act, you can use the Tax Exempt Organization Search on the IRS website. 

Posted by: Carrie Minnich