Planning Alert – Increased Charitable Donation Deductions Under the CARES Act

Obermayer Rebmann Maxwell & Hippel LLP

Obermayer Rebmann Maxwell & Hippel LLP

Under the Coronavirus Aid, Relief and Economic Security (CARES) Act, the limit on charitable deductions on your income tax return has been drastically increased. 

For individuals who itemize their deductions, you can deduct charitable donations in 2020 up to 100% of your adjusted gross income.  Additionally, if your charitable donation exceeds your AGI in 2020, you can carry forward the deductions for up to 5 years.  In order to qualify for this increased deduction, the gifts must be made in 2020, the gifts must be made in cash, and the gifts must be made to a public charity.  Donor advised funds and many private foundations are not included. 

For taxpayers who do not itemize deductions, charitable donations of up to $300 in 2020 can be deducted as an above the line deduction. 

In light of the SECURE Act, many individuals with large retirement accounts have been considering a Roth conversion.  If a taxpayer is also charitably inclined, a large charitable donation in 2020 could offset the income taxes incurred on a Roth conversion.  If you were considering making charitable gifts at your death, making those gifts now to offset income taxes from a Roth conversion or selling appreciated assets has the benefit of providing for charitable causes during a time of increased need while also saving on your income tax bill. 

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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