COVID-19 Pandemic: Charitable Donations and Tax Deductions

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We Americans are a generous people. We have a saying in this country, "When the going gets tough, the tough get going." And we are tough. And we are also giving.

From a tax point of view, charitable donations is one of the few itemized deductions that was left untouched by the recent TCJA (Tax Cut & Jobs Act of 2017). With that said, there have always been certain limitations on when a donation can be deducted.

Under the rules of the TCJA, a deduction for charitable donations could only be taken if one was able to itemize their deductions. Because of the changes wrought by the TCJA, many Americans were forced to take the Standard Deduction instead.

The effect of this change in our tax laws meant that our generosity was rewarded only through a satisfaction of our need to be altruistic to others; a pecuniary reward through the tax code was beyond the reach for most taxpayers.

The CARES Act creates a new $300 deduction for donations regardless of whether one itemizes or takes the standard deduction - though there is still a requirement to actually make a donation - Not every American is as honest as the clients of our practice.

Under the TCJA, charitable donations were limited to 60% of one's AGI. The CARES Act raises that limitation to 100% of AGI - meaning, people can take a deduction for donations equal to their Adjusted Gross Income.

For C corporations, the limitation on donations is raised from 10% to 25% of taxable income.

In reality, not many people will be able to be so generous, but it's nice to know that Congress is allowing for the possibility.

There are other rules for contributions to donor advised funds and private foundations. If you are considering making a donation to such a plan, please consult with your tax adviser first.

Thank you again for this opportunity to serve.

Stay safe and wash your hands.

Sincerely,

Jonathan Rivlin, CPA

President

The Rivlin Group PC

Disclaimer:

The purpose of this article is for informational/educational use only. No client relationship is intended by virtue of your use of this article. This article cannot be relied on for official advice regarding your specific situation, and is meant only to be general in nature. Because the regulatory environment is so dynamic at this time, it is possible that the content in this article will be superseded. This article was drafted on 12th April 2020.

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