New Deduction Strategies for Charitable Contributions

The coronavirus pandemic has brought about a number of tax changes. Julian Block highlights several in his latest column.

Apr 17th 2020
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During these tumultuous times, I can’t come up with a more appropriate way to begin and end another of my tax columns than to cite some movingly expressive comments by Erin M. Collins, a high-ranking IRS executive whose job is to help taxpayers, just as accountants, attorneys, enrolled agents and financial planners, among others, endeavor to assist their clients.

Ms. Collins joined the Taxpayer Advocate Service (TAS), an independent agency within the IRS, as the third National Taxpayer Advocate in March 2020. She replaces Nina Olson, who stepped down from the role last summer after 18 years on the job.  

TAS staffers help taxpayers who are experiencing economic difficulties, such as not being able to provide necessities like housing, transportation or food, taxpayers who are seeking help in resolving disputes and other kinds of problems with the IRS, and taxpayers who believe an IRS system or procedure isn’t working as it should.

Advocate Collins noted that “[t]he last few weeks have been extraordinarily challenging for most Americans, as many of us have been cloistered in our homes, told to shelter in place, and been urged to refrain from gathering with family or friends.”

Because the coronavirus chaos has brought about many tax changes, I’m going to employ this column to delve into the highlights of two COVID-19-inspired changes that liberalize deductions for charitable contributions. Also, as I’ve frequently done in my columns, I’ll cite a long-standing, often-missed tax trimmer for individuals who use their cars to do volunteer work on behalf of schools, hospitals, religious institutions and other Code Section 501(c)3 organizations.

Modest incentive to encourage modest contributors. Tucked into the $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act that was okayed by Congress and signed by President Trump on March 27, 2020, is an easily overlooked provision that permits individuals to deduct as much as $300 given to charitable organizations. The legislation allows them to claim the $300 as one of those adjustments to income that are going to be on 2020’s version of Schedule 1 of Form 1040.

Those kinds of adjustments were previously characterized as above-the-line deductions on1040 forms for 2017 and earlier years. Put more plainly, these filers will qualify for the write-off without having to itemize on the 1040’s Schedule A.

Generous incentive to encourage generous contributors. Going in the other direction, the CARES Act includes another provision crafted to encourage affluent donors. Before the CARES legislation took effect, the law generally placed a cap on write-offs for monetary donations. The ceiling was 60 percent of a taxpayer’s adjusted gross income. The legislation removes the cap for contributions made during calendar year 2020.

Will accountants and other tax pros counsel their clients to contribute all of their income? I’m skeptical that this will happen. Stay tuned for AccountingWeb announcements.

Tax break for generous donors and modest donors who use their cars to do volunteer  work on behalf of charities. The law allows volunteers who are itemizers and claim charitable contributions to include their unreimbursed, out-of-pocket expenses. For use of their cars, they can claim a standard mileage rate of 14 cents a mile. They’re also entitled to deductions for parking charges, as well as tunnel, bridge and turnpike tolls they shell out for in the course of their driving. See “Tax Planning Basics: What to Know About 2020’s Standard Mileage Rates” that ran on April 9, 2020.

An example: Victoria volunteers for a charitable organization that helps beleaguered individuals, who, as Taxpayer Advocate Collins noted, cloister in their homes, shelter in place, and refrain from gathering with family or friends. Victoria uses her car to deliver food and other necessities to their dwellings and drive them to medical appointments.

She dips into her own funds to pay for protective clothing worn while driving. Obviously, the clothing isn’t adaptable for ordinary wear. Consequently, my expectation is that the IRS agrees Victoria’s clothing costs are allowable, the same as her car mileage.

Additional articles. A reminder for accountants who would welcome advice on how to alert clients to tactics that trim taxes for this year and even give a head start for next year: Delve into the archive of my articles (more than 350 and counting). 

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