Now that the tax season is finally over, we decided to write a few blogs on how your 2020 taxes may be affected by the pandemic and the CARES act. While most of the media attention was focused on the tax deadline being extended to July 15th, the stimulus payments, and the small business loans and grants, there is another provision that may be helpful to some individual taxpayers.
Most folks know that they are able to deduct charitable contributions on Schedule A (itemized deductions). With the increase in the standard deduction, many taxpayers have found it more advantageous to use the standard deduction rather than itemizing their deductions.
For 2020, there is a temporary rule that allows taxpayers to deduct up to $300 of charitable contributions even if they are using the standard deduction. The new deduction will go on Schedule 1, which is the form where you can deduct items such as educator expenses, IRA contributions, health savings account contributions, and student loan interest.
The CARES act also raised the limit for charitable contributions when the taxpayer itemizes. Previously, a taxpayer could deduct contributions up to 60% of their adjusted gross income. For 2020, the limit is 100%.
Both of these provisions are temporary, so make sure you take advantage of them now in 2020. If you have any questions regarding your 2020 taxes and how they will be affected by the pandemic or if you’d like to work with an expert from Crystal Financial to assist you with your taxes, please reach out! We’d love to help.Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.