Submitted by Richard Allen, EA, AFSP

Friday, March 27, the Congress passed, and the President signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

NEW CHARITABLE DEDUCTION FOR 2020. Up to $300 per taxpayer ($600 for a married couple) in annual charitable contributions. This is available only to people who take the standard deduction (for taxpayers who do not itemize their deductions). It is an “above the line” adjustment to income that will reduce a donor’s Adjusted Gross Income (AGI), and thereby reduce taxable income.

Remind your tax clients who take a standard deduction on their 2019 return to keep track of their charitable contributions for their 2020 tax return.

To qualify, taxpayers must have made contributions in 2020 directly to organized churches, religious organizations, or charities recognized by the IRS. Charities recognized by the IRS can be found at: https://apps.irs.gov/app/eos/

A donation to a donor advised fund (DAF) does not qualify for this new deduction. A donor-advised fund (DAF) is a charitable giving account available through many investment companies. It is designed
exclusively to invest, grow, and give assets to charities for meaningful and lasting impact. Here is how it works: A taxpayer donates assets into a DAF and recommends how those assets should be invested. The contribution is immediately tax-deductible and the assets in the DAF grow tax-free. When the taxpayer is ready, the taxpayer will recommend a grant to a charity they care about, and investment company makes the distribution directly to the charity. Others call this a philanthropic fund.

Other considerations for charitable giving:

1. Contributions to “Go Fund Me” causes are generally not deductible, because they are usually payable to specific individuals or families, and not to organized charities recognized by the IRS.
2. Practitioners and their clients should watch out for FAKE CHARITIES. Seniors often receive phone calls or letters from “charities”. These are very often just call centers trying to get a lot of money from the taxpayer, or worse, to steal their identity. Taxpayers should almost never donate to organizations soliciting them by phone or mail. I have seen older taxpayers with dozens of payments to fake charities.
3. Churches and religious organizations do not need to register with the IRS, since they are automatically exempt. However, taxpayers should be personally familiar with these churches or religious organizations.