Universal Charitable Deduction in 2020

Deepening health and economic suffering from the coronavirus pandemic are touching all of us in some way this year.  Together with first responders and frontline workers, nonprofits are working tirelessly to stem the tragic loss of life and livelihood and help ensure the survival of those in need.

And the amount of need is staggering. Feeding America, a nonprofit network of 200 food banks and 60,000 food pantries and meal programs across the country, estimates that 50 million people in the U.S., including 17 million children, are experiencing food insecurity in 2020. In his November 30 article “There are many reasons to donate to charity this Giving Tuesday – but here’s a little added tax incentive”, Andrew Keshner of MarketWatch writes, “A growing share of Americans say it’s tough to make ends meet and millions are behind on their rent as an eviction moratorium nears its Dec. 31 end.” 

Yet, while need has been steadily growing, Keshner notes, contributions to nonprofits have been less predictable.  He quotes Rick Cohen, spokesman and chief operating officer of the National Council of Nonprofits, as describing 2020 contribution levels as a “bit of a rollercoaster”, with fluctuations likely mirroring the uncertainty donors may have about what they can afford as the pandemic stretches on. 

As a result of the Tax Cut and Jobs Act of 2017, most Americans now take the standard deduction rather than itemizing deductions when filing taxes. That has had an impact on charitable donations, which continue to be deductible on federal returns only for those claiming itemized deductions.  According to Keshner, IRS statistics show that “More than 87% of tax returns filed last year took the standard deduction.” If that 87% included you, then you may be pleased to hear that the CARES Act allows you to take up to $300 as a (federal) above -the-line deduction for contributions to a qualified charity in 2020.

“Universal Charitable Deduction”

Tracy McKnight, a CPA and Partner with Hermanson & Leitner here in the Twin Cities, describes the deduction created by the CARES Act this way:

“It is up to a $300 cash donation that can be deducted “above the line”, whether you’re married filing jointly or a single taxpayer and whether or not you itemize.  Additionally, it has to be cash-check-CC to a charity; not a Donor Advised Fund, not a GoFundMe (unless the GoFundMe Fundraiser is a charity). As always, if you give more than $250 to a charity at once, you will need to get written acknowledgement from the organization to keep with your tax records.”

Tracy added the following tips for Minnesota taxpayers:

“It is important to note that -- at this time --this special $300 deduction is an addback to MN, meaning that MN doesn’t allow this specific deduction. Instead they add it back to income.  MN does have a separate deduction for the non-itemizer’s charitable giving, which results in a deduction of 50% of the amounts over $500 including goods and cash.”

As always, it’s important to check details as they pertain to your specific situation with your trusted tax advisor.

This year, perhaps more than any other I can remember, I am grateful for all that I have. Still, there are days when it is difficult to shrug off the weariness of this coronavirus pandemic and the social distance its containment requires. I have noticed that engaging with nonprofits broadens my community and gives me the fulfillment of doing something at a time when it is easy to feel helpless.

When and if you are able to give, consider making monthly contributions. The predictability of recurring contributions is invaluable to nonprofit organizations.  From a cash flow standpoint, a monthly-giving strategy might allow you to make a larger gift each year.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

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Ardis L Black is located at 991 Sibley Memorial Highway, Suite 201, Lilydale, MN 55118 and can be reached at 651-317-4330.Securities and Advisory Services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Advisor. Fixed insurance products and services offered by Shamrock Wealth Management or CES Insurance Agency.