Expanded charitable contribution deductions

For charitable contributions made in 2020, there is now available an unlimited charitable deduction for cash contributions to public charities, for taxpayers who itemize deductions (file Schedule A as part of their Form 1040).

This means that for every dollar contributed, an income tax deduction will be allowed up to the taxpayer’s adjusted gross income (AGI). The “unlimited” charitable contribution deduction is applicable only for cash contributions. Prior to the passage of the CARES Act, there was a 60% limitation for such deduction.

The CARES Act also increases the limitation on the corporate charitable contribution deduction from 10% of taxable income to 25% of taxable income. Further, the limitation on contributions of food inventory is increased from 15% to 25%.

For tax years beginning in 2020, eligible taxpayers are entitled to an above-the-line deduction of up to $300 for qualified charitable contributions. An eligible taxpayer is an individual who did not elect to itemize deductions (to file Schedule A as part of their Form 1040). “Above-the-line” means the deduction reduces AGI. A qualified charitable contribution is a cash contribution to public charity.

Individuals may find this provision important due to previous increased standard deduction amount that made itemizing deductions unavailable to many taxpayers.