The CARES Act, enacted in March 2020, included a provision to encourage support for charitable organizations struggling during the COVID-19 pandemic. This provision allows a $300 deduction of monetary donations made to qualified charitable organization in 2020 for non-itemizers. This deduction does not apply to private foundations, donor advised funds, or carryover of excess contributions. (Visit IRS.gov for more information)
Though a welcome benefit for all taxpayers, married individuals may want to consider the tax implications or filing separately rather than jointly, as this deduction is one of many that is adversely impacted by the “marriage penalty” (see more below).
This charitable contribution deduction is available to anyone who doesn’t choose to itemize and claims the standard deduction. However, tax filing status is disregarded, which means couples who file jointly can only deduct the maximum of $300, but for those who choose to file separately, each spouse can claim the maximum $300 deduction, doubling the benefit.
For taxpayers who choose to itemize deductions, the usual rules apply, and no $300 deduction is available on top of regular charitable contributions.
Individuals who wish to make additional charitable contributions in 2020, have an opportunity to increase the impact of their donations when they participate through the National Giving Tuesday campaign on December 1, 2020. Visit the GiveBig Pittsburgh website or contact the nonprofits directly for additional information about how to support local organizations.
About the marriage penalty
Although the Tax Cuts and Job Act (TCJA) made changes that benefitted many taxpayers for tax years 2018 through 2025, the “marriage penalty” still exists for some high-income individuals. The marriage penalty results when a married couple pays more taxes by filing jointly then they would pay if each spouse could file as a single person. Prior to the TCJA, the marriage penalty began in the 28% tax bracket ($153,100 – $233,350, married filing jointly), but under the TCJA, it takes effect at the 35% bracket ($400,000+, married filing jointly). This penalty has adversely affected couples in which each spouse had roughly the same amount of income.
For taxpayers choosing “married filing jointly,” the income of both individuals is combined, which may impact some tax benefits, like itemized deductions. In addition, stacking the income together may reduce or eliminate deductions with adjusted gross income (AGI) floors like those for medical or miscellaneous expenses. Even though some joint-filing married taxpayers do qualify for itemized deductions under the TCJA, the state and local tax (SALT) payments are currently limited to $10,000 per year. Other non-itemized deductions, like the one for charitable contributions, may also be impacted.
If you have questions or need assistance with your tax planning or compliance, please contact GYF at 412-338-9300.