Charitable Giving in the Age of COVID-19

By and
April 15, 2020

As many churches in our area celebrated Easter in their parking lots or over video recordings, we cannot help but think what impact the coronavirus is having on not just churches but other local nonprofit organizations in our communities.  Loss of jobs or lowered salaries have left many people cutting non-essential expenses, including club memberships and donations to their favorite charities.

Congress considered this impact to the nonprofit community in the CARES Act.  Under the act, § 501(c)(3) and § 501(c)(19) organizations with less than 500 employees are eligible for payroll protection as well as other loan programs for affected small businesses (our firm has covered in the following hyperlinked blog posts SBA Releases PPP Info and Updated PPP Application).

In addition, the CARES Act includes incentives for individuals and businesses to continue their charitable donations through this difficult time.  First, it provides an above-the-line deduction for charitable contributions of up to $300.  Since 2018, most taxpayers are choosing to not itemize deductions, including charitable contributions, because of substantial increases in the standardized deduction. The loss of itemized deductions in favor of the standardized deduction means many taxpayers do not see a tax benefit to their charitable contributions. The new above-the-line deduction is meant to incentivize donations to charities, many of which are working to help their communities during the COVID-19 pandemic as taxpayers will now receive a tax benefit for any charitable contribution up to $300.

For those that wish to make large charitable contributions or who have high deductible expenses, the CARES Act also increases the amount of charitable contributions that may be deducted.  The new allowance allows a taxpayer to deductive charitable contributions up to 100% of their adjusted gross income (this is a 40% increase from the previous 60% of the taxpayer’s adjusted gross income).  For corporations, the limit has increased from 10% to 25% of adjusted gross income and the limit has increased from 15% to 25% of adjusted gross income for donations of food.

We work with many clients to help them determine the right method and time to engage in charitable giving.  Not only can Ruder Ware’s attorneys help design a giving plan during a client’s lifetime, we also work with clients to make sure their estate plan accurately reflects their intentions.  We encourage you to reach out to any member of our Trusts & Estates Practice Group to discuss options, we are happy to help you support your passions and goals.

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