Under the CARES Act, there’s an above-the-line deduction for charitable contributions for 2020. Does it pertain to years after that or just 2020?
That was the question posed to Jeffrey Levine, Director of Advanced Planning at Buckingham Wealth Partners, in this episode of Ask the Hammer on Retirement Daily.
Well, the CARES ACT wasn't quite clear. It read: "In the case of taxable years beginning in 2020, the amount (not to exceed $300) of qualified charitable contributions made by an eligible taxpayer during the taxable year."
So, it must be 2020 and all future years.
Wrong. Shortly after the CARES Act became the law of the land, the Joint Committee on Taxation issued in April a report that stated the following:
"The provision permits an eligible individual to claim an above-the-line deduction in an amount not to exceed $300 for qualified charitable contributions made during a taxable year that begins in 2020. The above-the-line deduction is not available for contributions made during a taxable year that begins after 2020. An eligible individual is an individual who does not elect to itemize deductions. Thus, a taxpayer taking the standard deduction, who absent the provision would not be able to deduct any charitable contributions, may claim an above-the-line deduction for qualified charitable contributions."
Bottom line: "It's just this year," said Levine.
Or at least is for now.
Levine also said the above-the-line deduction for charitable contributions is important to know about - especially for the 100% of taxpayers who want to pay as little income tax as possible.
But it's also a bit of a "nothing burger" because the tax savings is so small, ranging from say $36 to $111, depending on your tax bracket.
Levine also said there's a "legitimate possibility" that the allowance of partial above-the-line deductions for charitable contributions will be extended and/or expanded at some point in the future.
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