Several important tax changes to the deductibility of charitable contributions have occurred as a result of the Coronavirus Aid, Relief and Economic Security Act (CARES Act).
1. All taxpayers, regardless of whether you itemize or use the standard deduction, can deduct $300 as an “above the line” reduction of net income for 2020.
2. If you itemize your deductions and use the charitable deduction as part of your total itemized deductions strategy, in year’s past you were limited in how much you could deduct each year to 60% of your adjusted gross income. In 2020, you can deduct up to 100% of your adjusted gross income and can carry forward the balance.
3. Donation of amounts from IRA’s. If you are taking distributions from your IRA, you can donate amounts directly from your IRA’s to a charity. You will not receive a tax deduction in this transaction, but you also will not have to claim the distribution as income. This is a way to draw down or reduce your balance in your IRA’s, possibly reducing future RMD’s (required minimum distributions) give to a charity and not have to pay tax on the distribution.
If you have any further questions, feel free to call our office 870.364.8992 or e-mail me at craig@maxwellcpa.com
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