The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (TCDTR) signed into law in December 2020, extends certain favorable CARES Act provisions regarding charitable deductions and provides for disaster relief deductions. Here are the highlights.

Individual Charitable Contribution Deduction for Non-Itemizers

Individuals that do not itemize deductions on their tax returns may take a charitable deduction for 2020 up to $300 per return for cash contributions to an organization exempt under Code Section 501(c)(3), except for contributions to supporting organizations and donor advised funds. This deduction will also be available for 2021, up to $300 (and, added by TCDTR, $600 on a joint return). The requirements for 2021 are essentially the same as for 2020.

Individual Charitable Contributions for Itemizers

For individuals who itemize for 2020 and 2021, the percentage limitation (60% of the taxpayer’s adjusted gross income) for cash contributions to public charities is disregarded. Thus, individuals temporarily may take a deduction of 100% of qualified charitable contributions.

Corporate Charitable Contributions

For corporations, the CARES Act increased the allowable charitable deduction for cash contributions to public charities to 25% of taxable income. Tax-exempt organizations, however, are still only allowed 10% for unrelated business income tax. This has not changed. However, corporations may deduct 100% of qualified disaster relief contributions paid between January 1, 2020 and February 25, 2021 (60 days after the enactment of TCDTR). The contributions must be for relief in an area declared a disaster for a reason other than COVID-19.

Donor Receipt Letters

Don’t forget to provide donor receipts to contributors that indicate whether the contribution is for disaster relief, is made in cash, the type of public charity receiving the contribution, and the date the contribution was made. It will be very important for donors to know whether they are eligible for these special rules.

TCDTR modified and extended the employee retention credit and added a new similar credit for employers affected by qualified disasters. Read more about this credit.

If you have any questions regarding the TCDTR, contact a Clark Nuber advisor.

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