What You’ll Learn:

In this post about charitable tax deductions for 2020, we’ll discuss:

  • How the CARES Act has changed some of the charitable giving rules for 2020
  • How to maximize tax benefits for charitable donations
  • Why there’s never been a better time to donate to a charitable organization

Deciphering the Changes to Charitable Tax Deduction Rules for 2020

Giving to a charity with a mission that’s close to your heart can be personally fulfilling in a number of ways. Not only can you support a cause in your community, but you can also know that you are doing your part to contribute to the betterment of the world.

For many individuals, claiming a deduction on their annual tax return makes regular charitable contributions something they can more easily fit into their household budget. Because a contribution deduction essentially reduces your total amount of taxable income, potentially reducing your overall tax rate, donating to charity isn’t just generous – it’s financially savvy.

But for today’s taxpayers, giving back is an especially easy choice to make, thanks in large part to the CARES Act.

How the CARES Act Changes the 2020 Charitable Deduction

In March of 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed in response to the COVID-19 global pandemic. In addition to outlining various measures for supporting the American people and economic recovery from the pandemic, the CARES Act also aimed to make charitable giving possible despite the implications of COVID-19.

The understanding was that many charity organizations would suffer significant impacts from the loss of donations, as many Americans found themselves unable to make their usual contributions. Therefore, the goal was to make it more feasible for Americans to donate and contribute more – if and when they could.

So, the act made some targeted adjustments to how taxpayers deduct donations to qualifying charities in 2020:

  • In past years, you were only permitted to claim the charitable contributions deduction if you itemized your deductions. Choosing the standard deduction effectively took the charitable deduction off the table. But now, taxpayers that do not itemize their deductions can claim up to $300 for cash contributions ($600 for married couples filing jointly) they made in 2020 to eligible organizations:
    • Qualifying organizations include those that have charitable, educational, scientific, literary, or religious purposes.
  • Additionally, the CARES Act placed a temporary suspension on the limits on charitable contributions, also increasing the limit on food inventory contributions.
    • The limit has been raised to 100% of an individual’s charitable contribution base.
    • Also, you can currently make a qualified contribution election separately for each of your donations, so you do not have to treat every contribution as “qualified” unless it is beneficial for you.

Filing Your 2020 Taxes with a Deduction for Charitable Giving

Above all, working with an experienced tax professional is an excellent way to ensure that you correctly claim any and all deductions. Learning how to deduct donations on your taxes is not a substitute for the services of a tax professional, but it can be a helpful means for preparing for tax time and planning future contributions.

Here are a few resources that can also be useful as we approach tax season:

  • Publication 526, Charitable Contributions from the Internal Revenue Service (IRS), explains the rules for charitable deductions, including how much you are typically allowed to deduct, how to report your donations, and the records you are required to keep.
  • Check to make sure the charity you donate to is included on the IRS list of tax-exempt organizations, which you can find here.
  • Schedule A, Itemized Deductions is the specific form you will use to claim all deductions, including those related to charity. If you opt to complete the tax process on your own, you will find line-by-line instructions on this form. However, it is recommended that you review this form with your tax professional for further information.
  • For individuals above the age of 70 ½ years, another way to support a chosen charity is via qualified charitable distributions from an IRA. This resource can provide more information about how to make a qualified charitable distribution from an IRA and answer common questions on the topic.

How to Make Sure You Receive the Maximum Deduction for 2020 Donations

For charities like the Arizona Friends of Foster Children Foundation, the CARES Act has opened the door to sustain our efforts in the community. And for taxpayers, it has created a way to continue making donations – and even an opportunity to be more generous when possible.

However, the changes resulting from the CARES Act could cause confusion for some, come tax time. For this reason, we encourage you to check with a professional tax advisor for personalized advice regarding your specific tax situation. An expert will be able to provide accurate, detailed information for your 2020 filing, as well as practical pointers for making the most of your 2021 donations.

Carry the Spirit of Giving into 2021 and Beyond

At the Arizona Friends of Foster Children, we have found that our work in the Arizona community has become more vital than ever before. The children in foster care need us, and it is your generosity that allows us to continue supporting their needs and offering an improved quality of life.

With your donations, our foundation funds scholarships, career planning education, and other efforts to support children in the foster care system through young adulthood. And as the CARES Act makes it even easier to receive tax benefits for charitable donations, we are exceptionally grateful to everyone that contributes to the work of helping Arizona’s children in need. The Arizona Friends of Foster Children Foundation is a 501(c)(3) nonprofit organization (Tax ID: #86-468850), so you can donate knowing that your contribution is fully tax-deductible.

Help change the lives of Arizona children in foster care by making a tax-deductible contribution to the Arizona Friends of Foster Children Foundation today.

Featured Image: Africa Studio / Shutterstock

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