New information has come out about the relief package the Senate passed in response to the COVID-19 outbreak. There are many provisions in this 900 page bill but one of the overlooked provisions is a universal tax break for charitable donations for the 2020 tax year.
When the new tax law was passed in 2017 it raised the standard deduction so much that itemized deductions were no longer necessary for many Americans. This unfortunately discouraged many people to give because it would no longer have an effect on their taxable income.
The proposal in the stimulus package is set to allow everyone to take a $300 above-the-line charitable income tax deduction for donations made in 2020. This means that even if you take the standard deduction, you can still receive an additional $300 deduction. The current standard deductions are $12,400 for individuals and $24,800 for married couples filing jointly.
This above-the-line tax deduction is designed to incentivize people to give to charities, many of whom are on the front lines during this health crisis. Another added incentive is that this can be the difference in reducing your adjusted gross income enough to qualify you for a lower tax bracket.
Provisions in this bill also incentivize the most generous individual donors by eliminating the percent of AGI limits for charitable deductions. Typically, there is a 50% of AGI cap on charitable deductions for individuals. This would be suspended for 2020. Corporations were not left out either. The 10% cap for corporations is being increased to 25% of taxable income.
We have made it a mission at Archetype to help families thrive across generations by connecting their money with their purpose. Part of accomplishing that mission is helping you maximize the impact your wealth can have through generosity. We would love to serve you by increasing your capacity to give.
Conner Combs serves as a wealth advisor for Archetype Wealth Partners in Dallas, Texas. Conner is an MBA graduate from East Texas Baptist University where he also played baseball and became only the second player in NCAA history to be named Academic All-American of the year twice. His passion at Archetype is to help others live in their purpose. Archetype exists to help families thrive across generations.
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