CARES Act updates, modifies IRS’ charitable giving guidelines

As part of the CARES Act, the largest economic stimulus package in U.S. history signed into law March 27, the federal tax code was amended, allowing for additional deductions for charitable giving.

Beginning with the 2020 tax year, the Internal Revenue Service will allow “partial above the line deduction for charitable contributions,” according to the text of the act. Above the line deductions are deductions subtracted from gross income to figure adjusted gross income. Below the line deductions are deductions made after AGI is figured — either itemized deductions or a standard deduction.

The new rule allows these taxpayers who utilize a standard deduction (below the AGI line) to deduct up to $300 of eligible charitable contributions from their gross income (above the AGI line), lowering their AGI amount.

For example, this means a taxpayer may deduct up to $300 in tithes to his or her local church while still taking the IRS’ standard deduction.

Additionally, exclusively for the 2020 tax year, the new law allows taxpayers to deduct eligible charitable contributions up to 100% of their AGI — up from the 60%, which has been the limit since 2017. (TAB)