CARES Act Brings New “Universal” Charitable Deduction for 2020

The historic $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act provides much needed relief to individuals, businesses, and nonprofits impacted by the COVID-19 outbreak in the United States. 501(c)(3) public charities and their donors should be aware of a new tax incentive in the law that could strengthen nonprofit fundraising at this critical time.

A seemingly small provision tucked away in the CARES Act may have an outsized impact when so many nonprofits are concerned about continuing to fulfill their missions. Before the CARES Act, taxpayers who itemized deductions when filing federal income tax returns were eligible to deduct contributions of money or property (up to a certain amount) made to 501(c)(3) public charities. However, taxpayers who chose not to itemize and took the standard deduction instead were not eligible to deduct these charitable contributions. In fact, the Tax Cuts and Jobs Act of 2017 increased the standard deduction, and so since 2017, fewer taxpayers itemized and therefore fewer have been eligible to deduct charitable contributions.

The CARES Act rewards all taxpayers for their generosity. The law allows all taxpayers — regardless of whether they itemize or take the standard deduction — to deduct total charitable cash contributions of up to $300 on their 2020 federal tax return. The incentive applies to donations made in 2020 but may be claimed on tax forms next year. The law also lifts a cap on annual contributions for itemizers. The University of Pennsylvania estimates that the “universal” charitable deduction for 2020 could increase total charitable contributions in 2020 by almost $110 million.

There are other provisions in the new law that will benefit nonprofits and the communities they serve, including the opportunity to apply for federally-insured, partially forgivable federal loans. At a time when governments, Americans, and the philanthropic sector all need to work together to address the transmission of the coronavirus and its effects on the economy, the law provides a small but needed boost to the nonprofit community.

While much more is needed from federal, state, and local governments, the emergency spending measure signed into law by President Trump on March 27 provides direct financial assistance to individuals, suspends federal student loan payments, offers grants and loans to small businesses and nonprofits, and directs much needed funding to our public health infrastructure. For more details, see NPR’s helpful summary.

At Bolder Advocacy, we are grateful for the work of the nonprofit sector and happy to be a resource to nonprofits as they engage in advocacy to amplify their impact.