$300 “Above the Line” Charitable Donation

By now many of you are familiar with the CARES act passed by Washington in March. Among other benefits, the CARES act provided $1,200 stimulus checks to eligible taxpayers, as well as $500 checks for eligible taxpayers with children under the age of 17.

One benefit of the CARES act that has not received a lot of press, is the ability for taxpayers to deduct up to $300 worth of charitable contributions in 2020 – even if they do not itemize their deductions on their tax return.

For tax year 2018 there were approximately 13.8 million families who claimed a charitable tax deduction, down from 36.8 million in the 2017 tax year. I don’t believe 23 million families stopped giving to charity in 2018, but rather fewer families are itemizing their deductions since the passage of the 2018 tax cuts.

Not only have Americans been helping each other by remaining physically distant over the past couple of months, many citizens have also been supporting their communities financially. The CARES act provides an additional incentive for families who are able to donate to charity in this time of need.

In normal times, only individuals or families who itemize their deductions can qualify for the charitable contribution deduction. Since the 2018 tax cuts dramatically increased the standard deduction for most taxpayers, only about 12% of taxpayers have been able to itemize their deductions.

For 2020 only, taxpayers who do not otherwise qualify for itemizing their deductions will be able to take a special $300 deduction for charitable contributions – while still claiming the standard deduction.

This special deduction is known as an “above the line” deduction, meaning it comes off the top of your income, and is not influenced by your ability to itemize deductions or not.

There are just a few “catches” to be aware of, such as:

The special donation must be made in cash – not stock or other appreciated securities.

The special donation must be made from after-tax accounts – not from an IRA (for people interested in donating from an IRA, read our article here).

The special donation must be made directly to a 501(c)(3) charity – it cannot be made to a Donor Advised Fund (for people interested in Donor Advised Funds, read our article here)

The special donation does not have to be made to a charity directly working on COVID-19 relief. Any charitable contribution you make in 2020 can qualify as long is it meets the criteria spelled out above.

This special $300 deduction is only for taxpayers who do not otherwise itemize their deductions. If you itemize your deductions, you will continue to receive credit for donations on your Schedule “A” of itemized deductions when you file your tax return.

We’re all in this together:

Over the past few months we’ve assisted clients with donations to food banks across the country, as well as Meals on Wheels programs, and various COVID-19 relief efforts organized by religious organizations. We’ve also had clients supporting animal shelters, as some shelters have seen an increase in drop offs from families who can no longer support their pets.

The ability for citizens to help their communities in times of great stress is wonderful to see. Not everyone is in a position to assist financially, but everyone has the ability to make the day a bit brighter for their neighbors, friends, and family in their own way, as we all work towards getting back to a sense of “normal” in the months to come.

About the author

William B. Burns, Jr. CFP® is a CERTIFIED FINANCIAL PLANNER professional and President of Burns Matteson Capital Management, a Financial Planning and Investment Advisory Firm with clients in 21 states throughout the US. He helps high-net-worth families reduce the worry and anxiety sometimes associated with wealth, allowing families to reclaim that time to reinvest back into their family, social, and professional relationships. www.BurnsMatteson.com