There are some very good reasons for individuals and businesses of means to give generously to charity this year. The pandemic has devasted a lot of our economy, and our fellow citizens need help. Understanding this, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to motivate individuals and businesses to give as much as they can – and realize tax benefits for doing so. Thus, because of the CARES Act, there are four temporary tax changes that significantly reward charitable giving in 2020.
These tax changes, however, will sunset at the end of this year, and it is unlikely that they will be available next year. So, in this article, we will take a brief look at these important tax changes so both individuals and businesses can make the most out of, and the most tax benefits from, their charitable giving in 2020. If, after reading this article, you would like to discuss your own tax situation, we invite you to call the Florida tax lawyers at the Law Office of Mary E. King, P.L.
The Law Office of Mary E. King, P.L. can make sure that your tax issues are resolved efficiently and at the lowest cost to you. Please fill out our online contact form, or call us at 941-906-7585 today.
1. Limited Charitable Deduction – Even if You Don’t Itemize
Generally speaking, individuals who take a standard deduction – and don’t itemize their deductions – cannot claim a charitable deduction on their tax returns. The CARES Act, however, allows individuals to claim a limited deduction on their 2020 tax returns for charitable cash contributions made to charity organizations that are qualified by the Internal Revenue Service (IRS).
Thus, individuals giving cash donations to qualifying charities in 2020 can take a deduction of up to $300 (or a maximum of $150 for married individuals filing separately). Notably, a “cash” donation includes donations made by check, credit card, or debit card, and even includes your out-of-pocket expenses if you volunteer your time at a qualifying charity. A “cash” donation does not include, however, the value of your volunteer services, securities, household items, or other property.
2. Increase on the Limit of a Charitable Deduction When You Itemize
In a normal tax year, there is generally a limit on the number of charitable deductions you can claim if you itemize your deductions. That limit goes as high as 60% of your adjusted gross income (AGI). In other words, the deduction you can claim for the amount you give to charity is maxed out at 60% of your income. The CARES Act, however, allows you to claim a deduction for charitable giving up to 100% of your AGI.
As with the section above, the deductions you can claim are limited to cash donations made during the calendar year 2020. You cannot take a deduction for excess contributions that were carried over from prior tax years.
3. Corporate Giving Limit Increased As Well
Typically, C Corporations are only allowed to claim charitable deductions up to a limit of 10% of the corporation’s taxable income. Under the CARES Act, that limit has been increased to 25%.
Thus, for C Corporations that make cash contributions to eligible charities during the 2020 calendar year, the corporation is permitted to claim deductions that amount to up to 25% of the corporation’s income. Without question, this increase in the deduction limit should incentivize companies that can give to give generously in 2020. Indeed, it is becoming increasingly clear that some large companies in the U.S. have done remarkably well even during the pandemic, while smaller companies have been hit very hard by the economic downturn.
4. Increase on Limit for Businesses Donating Food
Similar to the increase in the cash contribution limit, C Corporations are usually not allowed to deduct donations of food inventory beyond 15% of their taxable income. The CARES Act, however, increases that deduction limit to 25% as well.
For other businesses, including sole proprietorships, partnerships, and S Corporations, the food inventory deduction limit is based not on taxable income, but on a special method for computing “aggregate net income.”
In sum, there are some very good reasons for individuals and businesses to give to charity this year. These four expanded tax benefits above, make it even more beneficial for individuals and businesses to give. In order for you to get the biggest ‘bang for your buck’ for your end-of-year charitable giving, consider consulting with an experienced tax lawyer.
Consult with the Sarasota Tax Lawyers at The Law Office of Mary E. King and Get the Help You Need
Having a Sarasota tax lawyer at your side to advise you on options and strategies for your tax returns this year is worth its weight in gold.
Consider reaching out to the Law Offices of Mary E. King to help. Tax matters can be complicated, and thus, it is always helpful to have someone in your corner who understands the tax law and deals with the IRS on a regular basis. Indeed, beyond just the stimulus payment from the IRS, there could be other issues with which a seasoned tax attorney can help.
So, when it comes to dealing with tax relief and tax litigation, you need to talk to a Sarasota tax planning attorney who can help. Mary E. King has spent her career concentrating in tax law and can help you with tax scams in Florida and elsewhere. Attorney King has a wealth of information about what types of options would make the most sense for you and your business.
That helps explain why she’s received an A+ rating from the Florida Better Business Bureau. If you have a tax-related issue – no matter how small or how large – setting up an initial consultation with Mary E. King, tax lawyer of Florida, is the first step you should take towards relief.
The Law Office of Mary King P.L. offers complete IRS problem-solving services including all areas from tax debt settlement to planning the most efficient tax strategy for individuals and businesses. Call us today to schedule an initial consultation. With years of experience as a tax lawyer in Sarasota for many clients, Attorney Mary E. King can make sure that your tax issues are resolved in your favor. Fill out our online contact form, or call us at 941-906-7585. Remember, at the Law Office of Mary E. King, we are focused on solving your tax issues for good.