CARES Act includes new charitable deduction

[pb4uski]

New to me... from Kiplinger:

If you take the standard deduction on your 2020 tax return (the one that you'll file in 2021), you can claim a brand new "above-the-line" deduction of up to $300 for cash donations to charity you make this year. Donations to donor advised funds and certain organizations that support charities are not deductible. Normally, you have to itemize on Schedule A to get a tax break for charitable donations. In this case, though, it's the other way around—if you itemize, you can't take this new deduction.

https://www.kiplinger.com/slideshow...&utm_campaign=20200419-tax&rmrecid=2655470411

 

[Hermit]

I gave $200 to the local food bank. I'm sure I'll give them another $100 before this is over. It should cut my taxes somewhere around $40 or $50. I'll need to print their e-mailed receipts.

 

[cathy63]

I saw this too and figured it will save us about $45 in taxes, so that's nice.

... if you itemize, you can't take this new deduction.

I realize you're quoting the article here, but this statement doesn't make sense to me. If you itemize, you can deduct charitable contributions up too 100% of your AGI this year (CARES act increased it from 60%). Why would you need the $300 deduction in addition to that?

Also, I hate to think about how long is it going to take the IRS to issue final forms this year. We need a new above the line deduction on schedule 2 for the $300 charitable contribution, updates to Sched A, a place to calculate whether you got enough of the stimulus tax credits, a place to specify whether the withdrawal from your 401(k) was a COVID-19 related and if you're carrying over the income and tax for 3 yrs, etc, etc, etc. I bet a lot of people will be waiting on their tax software to implement various forms next Feb.

 

[pb4uski]

Yeah... in 2017 they simplified taxes by increasing the standard deduction which made the standard deduction more attractive for many more taxpayers.... which is good... but now they are just complicating it again.

And since I do LTCG to the top of the 0% preferenced income bracket this year and Roth conversions to the top of the 12% tax bracket in most other years the extra $300 deduction doesn't really save me money, it just allows me to do $300 more of LTCG or Roth conversions.... IOW it won't change my tax bill at all.

 

[Onward]

New to me... from Kiplinger

Good info. I didn't know this, and I try to stay up on tax law. Thanks.

 

[OldShooter]

... If you itemize, you can deduct charitable contributions up too 100% of your AGI this year (CARES act increased it from 60%). Why would you need the $300 deduction in addition to that? ...

It's for people who do not itemize. In our case, we are taking RMDs and doing all of our charitable via QCDs that bypass the 1040. Our remaining deductions only total about half the standard deduction amount, so we go with the standard -- which is very nice. This appears to allow us to recover around $75 state and federal from our tax bill.

I have sent @pb4's link to a couple of charitable organizations we are involved with. Hopefully that will get their development people out hustling those $300 contributions before someone else gets them.

 

[cathy63]

It's for people who do not itemize. In our case, we are taking RMDs and doing all of our charitable via QCDs that bypass the 1040. Our remaining deductions only total about half the standard deduction amount, so we go with the standard -- which is very nice. This appears to allow us to recover around $75 state and federal from our tax bill.

I have sent @pb4's link to a couple of charitable organizations we are involved with. Hopefully that will get their development people out hustling those $300 contributions before someone else gets them.

I get it, I just thought it was funny that Kiplinger's pointed out that if you itemize you can't take the $300 deduction, as if there would be any benefit to it for someone who is already itemizing.

 

[donheff]

It's for people who do not itemize. In our case, we are taking RMDs and doing all of our charitable via QCDs that bypass the 1040. Our remaining deductions only total about half the standard deduction amount, so we go with the standard -- which is very nice. This appears to allow us to recover around $75 state and federal from our tax bill.

I have sent @pb4's link to a couple of charitable organizations we are involved with. Hopefully that will get their development people out hustling those $300 contributions before someone else gets them.

I'm doing the same with QCDs but I forwarded this link to a local nonprofit that might do well to mention it in their newsletter. Thanks for the suggestion.

 

[PatrickA5]

I saw this too and figured it will save us about $45 in taxes, so that's nice.



I realize you're quoting the article here, but this statement doesn't make sense to me. If you itemize, you can deduct charitable contributions up too 100% of your AGI this year (CARES act increased it from 60%). Why would you need the $300 deduction in addition to that?

Also, I hate to think about how long is it going to take the IRS to issue final forms this year. We need a new above the line deduction on schedule 2 for the $300 charitable contribution, updates to Sched A, a place to calculate whether you got enough of the stimulus tax credits, a place to specify whether the withdrawal from your 401(k) was a COVID-19 related and if you're carrying over the income and tax for 3 yrs, etc, etc, etc. I bet a lot of people will be waiting on their tax software to implement various forms next Feb.

+1

I usually buy TurboTax in November. I imagine it will be late this year with all of the changes needed. I'll be taking advantage of the $300 deduction. Should save us a whopping $36!

 

[boilerman]

It’s a $600 deduction for MFJ

 

[pb4uski]

^^^ You're right... even better!

 

[PatrickA5]

^^^ Make that $72! Yee Haw!

 

[kaneohe]

It’s a $600 deduction for MFJ

got a link? last I saw, the lawyers were saying $300 w/no mention of MFJ
and if you find a $600 reference, it was from a charity.

 

[cathy63]

got a link? last I saw, the lawyers were saying $300 w/no mention of MFJ
and if you find a $600 reference, it was from a charity.

The actual text of the CARES act adds this to the existing list of 21 things you subtract from gross income to get your AGI: "(22) CHARITABLE CONTRIBUTIONS.—In the case of taxable years beginning in 2020, the amount (not to exceed $300) of qualified charitable contributions made by an eligible individual during the taxable year."

So, on the one hand, the law doesn't explicitly say an MFJ couple can have a $600 deduction, but on the other hand, a couple is obviously composed of two individuals who are each entitled to a $300 deduction as long as they don't itemize. I don't think the IRS has said how they're interpreting this yet, so it may be a few months before we know.

I would also note that unlike some parts of the CARES act, this provision does not automatically go away in subsequent years, so it may be with us for a while.

 

[pb4uski]

Here's the text:

SEC. 2204. ALLOWANCE OF PARTIAL ABOVE THE LINE DEDUCTION FOR CHARITABLE CONTRIBUTIONS.

(a) IN GENERAL.—Section 62(a) of the Internal Revenue Code of 1986 is amended by inserting after paragraph (21) the following new paragraph:

‘‘(22) CHARITABLE CONTRIBUTIONS.—In the case of taxable years beginning in 2020, the amount (not to exceed $300) of qualified charitable contributions made by an eligible individual during the taxable year.’’.​

Since the statute states per individual I think it is likely that it will be $600 for a couple filing jointly.

 

[kaneohe]

don't know if this will be the last word........or just for now.............
https://www.bogleheads.org/forum/viewtopic.php?f=2&t=311331

by Alan S. » Fri Apr 24, 2020 8:53 pm

Alan S. wrote: ↑Tue Apr 21, 2020 7:18 pm
jebmke wrote: ↑Tue Apr 21, 2020 2:46 pm
'Has anyone seen anything authoritative (ie. IRS) that the $300 is per taxpayer (therefore $600 for MFJ)?'
Amended on 4/24/20:
Per a footnote in the Joint Committee Report on the CARES Act, the footnote is self explanatory:
'76 Sec. 62(f)(1).
The $300 limit applies to the tax-filing unit. Thus, for example, married taxpayers who file a joint return and do not elect to itemize deductions are allowed to deduct up to a total of $300 in qualified
charitable contributions on the joint return.'

Therefore, it appears that $300 is the max deduction on an individual or joint return.

 

[pb4uski]

It appears so.

 

[street]

Thanks for that info. I also have given to charity this year for helping people that got laid off because of the virus. The money will be given as grants for qualifying people that need some extra funds during these hard times..

I also give on a regular bases to a Foundation I'm proud to be part of for the work they do.

 

[cathy63]

don't know if this will be the last word........or just for now.............
https://www.bogleheads.org/forum/viewtopic.php?f=2&t=311331

by Alan S. » Fri Apr 24, 2020 8:53 pm

Alan S. wrote: ↑Tue Apr 21, 2020 7:18 pm
jebmke wrote: ↑Tue Apr 21, 2020 2:46 pm
'Has anyone seen anything authoritative (ie. IRS) that the $300 is per taxpayer (therefore $600 for MFJ)?'
Amended on 4/24/20:
Per a footnote in the Joint Committee Report on the CARES Act, the footnote is self explanatory:
'76 Sec. 62(f)(1).
The $300 limit applies to the tax-filing unit. Thus, for example, married taxpayers who file a joint return and do not elect to itemize deductions are allowed to deduct up to a total of $300 in qualified
charitable contributions on the joint return.'

Therefore, it appears that $300 is the max deduction on an individual or joint return.

Well, that's interesting. Thanks for the info.

 

[scrabbler1]

Thanks for the info, pb4uski. Looks like I will save $12 on my 2020 taxes. I hope the time and effort to change my homemade spreadsheet is worth the $12 LOL! I included a note in my 2020 tax spreadsheet to be on the lookout for this.


I wonder if my NY tax return will be impacted, as they piggyback onto the federal return.

 

[Sunset]

This is really great for some of the older relatives I do taxes for, as they all take the standard deduction most years, but still get lots of opportunities (scammed ) to give repeatedly by "charities" to the tune of $10 per shot.

I've noticed, once a person is old, give $10, and they will send you a request many many times over a year, after all who remembers if they gave last month ?

 

[gcgang]

$300? Who came up with this? I mean, why bother to take the time and effort to write this into the bill? Are you sure there isn’t another 0 or two missing?

My tax advisor will probably charge more than $300 to process the new form. Lol.

 

[pb4uski]

$300? Who came up with this? I mean, why bother to take the time and effort to write this into the bill? Are you sure there isn’t another 0 or two missing?

My tax advisor will probably charge more than $300 to process the new form. Lol.

Who do you think lobbied for the change?