COVID-19 Charitable Contributions
The recently issued Coronavirus Aid, Relief, and Economic Security (CARES) Act modifies certain allowances and limits on charitable contributions.
1. Allowance of partial above the line deductions for charitable contributions (Section 2204 of the Act)
This section allows the individuals, who elect not to itemize deductions, to claim an above-the-line deduction for cash donations up to $300 to qualified charitable organizations. In order to be deductible, the contribution must be made to a charitable organization described in Internal Revenue Code section 170(b)(1)(A) which includes churches, schools, hospitals, university endowment foundations, publicly supported organizations, and governmental units.
This section applies to taxable years beginning after December 31, 2019.
2. Modification of limitations on charitable contributions during 2020 (Section 2205 of the Act).
The section temporarily suspends and modifies the limitations on certain cash contributions for individuals and corporations.
The individuals’ limit of 60% of their adjusted gross income on cash contributions made to qualified charitable organizations will be increased to 100%. If the contributions exceed 100% of adjusted gross income, the excess contributions may be carried over for the next five tax years.
The corporations’ limit of 10% of their taxable income on cash contributions made to qualified charitable organizations will be increased to 25%. If the contributions exceed the 25% of taxable income, the excess contributions may be carried over for the next five tax years.
Food inventory contributions is increased from 15% to 25% for both C corporations and non-C corporations.
This section applies to taxable years ending after December 31, 2019.
About the Author - Dan Kats, Audit Manager, CLFP, recently joined ECS Financial Services, Inc. Dan has more than 11 years of public accounting experience with commercial, not-for-profit, and governmental entities providing audit and consulting services, such as financial statement audits and financial statement reviews. He has worked with a variety of entities, including equipment leasing and financing services companies, construction and real estate entities, universities, colleges, foundations, not-for-profit organizations, associations, retail, and professional services organizations, state agencies, and municipalities.
