Is there a way we can encourage our small-donor base to help out during the current coronavirus emergency? We can use every penny we get.
The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act provides a special deduction for charitable contributions up to $300 for all taxpayers who don’t itemize on their tax returns. The increase in the standard deduction in the 2017 tax act (See Ready Reference Page: “Tax Bill Not Good for Nonprofits”) has eliminated the economic benefit for charitable contributions for about 30 million filers who no longer itemize their deductions and the total of charitable contributions actually dropped between 2018, the first year of the applicability of the new rule, and 2017. Current itemizers will, of course, get to itemize a contribution in any amount.
The CARES Act provides a deduction for any taxpayer who does not itemize up to $300 for a charitable gift made in 2020, so long as the contribution is not made to a 509(a)(3) “supporting organization” (See Ready Reference Page: “Supporting Organizations Qualify as Public Charities”) or to a donor advised fund (See Ready Reference Page: “Donor Advised Funds Still Compare Well With Private Foundations”) The provision does not meet the request from the sector for a permanent “universal deduction” up to $3000 a year, but offers a slight temporary benefit during the crisis for gifts given directly to operating charities.