CPA Rachel Daddesio recently discussed how making charitable contributions during the pandemic can affect your finances.
The COVID-19 pandemic has drastically affected the finances of individuals and businesses. These major changes have made Certified Public Accountants, like CPA Rachel Daddesio, some of the best resources for ensuring your finances are stable and understanding important tax information. Rachel Daddesio recently explained how charitable contributions, and the deductions individuals can make, have changed due to the coronavirus pandemic.
“Many citizens are unaware that the CARES Act, signed into law just a few months ago, made some major changes to the rules regarding cash contributions to public charities and individuals,” Rachel Daddesio said.
Rachel Daddesio explained that the Coronavirus Aid, Relief, and Economic Security (CARES) Act allows individuals who claim a standard deduction can write-off their donations up to a total of $300. Individuals who itemize charitable contributions on their tax returns were formerly limited to deducting cash donations up to 60 percent of their adjusted gross income. That limit is now 100 percent, due to the CARES Act.
However, Rachel Daddesio explained this increase does not apply to donations to donor advised funds or private foundations. She added that the limit on deducting donations of food inventory has now been increased from 15 percent of net income to 25 percent of net income.
“The IRS has yet to inform the public how these changes will be implemented in terms of filing tax returns,” Rachel Daddesio said. “However, as CPAs, we will be among the first to know.”
Rachel Daddesio described donations to C corporations are now deductible up to 25 percent of taxable income as opposed to the former 10 percent. Another major benefit of the CARES Act is that contributions by individuals that exceed this year’s limitations can be used for up to five years. Rachel Daddesio added that charitable donations to individuals, no matter the circumstances, can not be deducted when filing tax returns.
“In the accounting industry, we are urging citizens to consult with qualified CPAs when submitting their income taxes for the year 2020,” Rachel Daddesio said. “There have been so many tax changes due to the coronavirus pandemic, and those who file on their own will likely be missing out on some major deductions and credits.”
The public can locate more information about new deductions for charitable contributions in the online IRS Publication 926. However, as Rachel Daddesio stated, this document does not include information about tax law changes for the year 2020. That information will have to be acquired from the IRS or a qualified CPA at a later date.