By Professor Christopher Woehrle, Chair & Professor of Tax & Estate Planning Department, College for Financial Planning, Centennial, Colorado
Among the over 100 provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act are two directly related to charitable giving.
The first is an above-the-line deduction against gross income in the amount of $300 for charitable contributions made after December 31, 2019 by filers taking the standard deduction. Since the Tax Cuts and Jobs Act has eliminated the deductibility of charitable giving for past itemizers now taking the standard deduction, this is welcome news. Although the tax relief is modest, it is a dollar-for-dollar reduction against gross income.
It will be interesting to see if this “universal charitable deduction” will be expanded since it will benefit an estimated 90% of tax filers. Given no sun-setting of this provision, the charitable community can focus on its expansion.
The second is the temporary suspension during 2020 of the AGI limitation for cash charitable contributions to public charities with a specific ineligibility to either donor-advised funds (DAFs) or 509(a)(3) organizations. It is theoretically possible for charitable giving to erase Federal income tax liability for 2020. To the extent such contribution generates a carryforward, it will be available for up to 5 years.
It also may be a warning to the DAF industry as DAFs cannot participate. Congress wants cash going to charity not parceled out over time. Stay tuned!
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