Why is this year different?
Congress passed legislation to help families and businesses after the coronavirus marched the U.S. economy off a cliff in March. Lots of different things were included in the CARES act legislation, including some one-time changes to tax law that make it more advantageous to donate this year than in previous years.
What are the key changes?
- For everyone: $300 tax deduction
Back in 2017, Congress significantly increased the standard deduction families can take on their taxes. As a result, many taxpayers no longer itemize their deductions. That means they don’t receive any direct federal benefit for their generous charitable giving. This year, Congress added back in a $300 charitable tax deduction for each tax return taking the standard deduction. So if you make a $300 cash donation this year to a qualifying charity, you’ll reduce your taxes. And, of course, your donation will help the charity and the people it serves.
Want to use your $300 and make an impact? Consider supporting the Annual Diocesan Appeal, which funds priorities such as: advancing social ministries, empowering parish communities and cultivating Catholic leadership.
- For our most generous supporters and potentially older donors: No more 60% AGI Limitation for Cash Contributions
The biggest benefit this year helps our most generous supporters and our older donors. Here’s how it works:
In the past, a donor could be very generous and give away the majority of their taxable income. He or she could then deduct cash gifts up to 60% of his/her adjusted gross income (AGI). For this year only, donors can deduct cash gifts up to 100% of their AGI.
So, for example, consider a donor who has $1 million of AGI for 2020 and would like to make a $3 million cash gift split evenly between Catholic schools, his or her parish and seminarian education. In prior years the donor’s deduction would be limited to $600,000 (60% of AGI). For this year only, the CARES Act allows a charitable contribution deduction of $1 million (100% of the donor’s AGI). Plus, the donor would still have a $2 million charitable deduction he or she could carry forward (subject to the old 60% of AGI limit) in the next five tax years.
This change in the tax law is extremely beneficial to donors who are considering making large gifts in the next few years as well as some of our older donors who have annual income, but don’t need it because they rely on other sources for their living expenses.
*As always, please consult your own financial advisors before making any decisions.