The CARES Act of 2020 brought about a change in how the IRS defines “Adjusted Gross Income” (AGI) on your tax returns.

Starting in 2020, “the amount (not to exceed $300) of qualified charitable contributions made by an eligible individual during the taxable year” are deducted, among other things, from gross income, in determining AGI.

The above language came out of the Internal Revenue Code. Let’s attempt to decipher this into language actual humans can understand.

The Short Answer

II you do not itemize deductions, starting in 2020, you can take as much as $300 in charitable contributions you make during the year. This reduces your taxable income and you may owe less taxes as a result.

How much less in taxes depend on your tax bracket, which can vary from 0 to 37% on your federal tax return. If you are already paying no federal taxes, this won’t change your tax bill. But otherwise, if you’re in, say, the 22% bracket and you gave $300 to charity, your tax bill will be lower by about $66.

What about state taxes? It’s not clear yet if California state law will conform to this law. If it does, that could save you a few more $$ on your state tax return.

Cash Contributions Only

Only charitable contributions made in cash (or credit card) are considered for this deduction. Non-cash deductions, such as giving used household items to Goodwill, are not included.

As a reminder, cash contributions to charities less than $250 require one of the following forms of documentation by the IRS: A bank record (e.g. canceled check or bank/credit card statement); a receipt showing the date, amount and name of the charity; or a payroll record, if it was withheld from your paycheck. Cash contributions over $250 also require a written acknowledgement from the charity showing date and amount and if any goods or services (other than religious benefits) were provided. You don’t need to attach this information to your return or anything; just keep it in your files.

$300 Per Return

So how does the $300 work for married couples? Is it $300 each? Nope. The $300 applies to all taxpayers. Yet another example of the “marriage penalty.” The $300 is per return.

What if you file married filing separate? There has been no clarification on this yet. We shall see.

Can I Take the Deduction If We Itemize Deductions?

No. If you itemize deductions, take the deduction there. If you are reading this, chances are that you did not itemize deductions in 2019. Before the Tax Cuts and Jobs Act of 2017 (TCJA), about 30% of taxpayers itemized deductions. After TCJA, it is estimated that only 10% of taxpayers itemize.

So give away if you can! Local Ventura County area charities at THIS LINK.