New $300 Adjustment for Charitable Contributions

Congress has approved a new Charitable Contribution Adjustment to Income deduction.  The adjustment can be up to a total of $300.  Tax professionals commonly refer to this deduction as an “Above the Line Deduction.”

This deduction could save your clients a little bit of money on their 2020 tax returns.  Mostly this will make you look good as a tax professional.  Which matters more than a little bit!

Some clients feel better when you share these new tax benefits with them verbally rather than simply handling it during actual tax preparation without telling them how you’re helping them.  Sharing this sort of information with your clients during our so-called “offseason” is a great way of staying in-touch.  Also, most clients like to know their tax preparer is a knowledgeable professional who cares about them. 

We need to avail ourselves of every opportunity to remind our clients why we are worth our fees!

The Cares Act Legislation

This new $300 charity deduction adjustment to income is part of the Cares Act legislation recently passed due to the Coronavirus.  During this pandemic, our country’s charities are needed more than ever.  But the 2017 Tax Cuts and Jobs Act has made it significantly less likely that taxpayers will itemize their deductions.  Therefore, many taxpayers have no way of benefiting tax-wise from charitable giving. 

The CARES Act allows taxpayers to deduct up to $300 in charitable contributions without itemizing deductions. This is an above the line deduction that reduces your adjusted gross income. The contributions must be made in cash to 501(c)(3) public charities.

Taxpayers who are able to itemize their personal deductions enjoy increases in the annual income limits on deducting charitable contributions the CARES Act.

Then there’s another something special just for the 2020 tax year.  Taxpayers who itemize can deduct charitable contributions up to 100% of their adjusted gross income, which is an increase from 50% of AGI.

In addition, corporate taxpayers may deduct up to 25% of adjusted taxable income, which is increased from 10%. 

The percentages will be reduced back to their original amounts for the 2021 tax year. This new $300 Charitable Contribution Adjustment may only be for 2020. Thus far the deduction availability has not been explained.

Stay Up-to-Date on Your Education Requirements

This is all information you’ll likely see in your annual update course.  And remember to share this information with your clients and present it as “good news”!  Most clients view taxes as sheer drudgery and so any chance we have to bring some good news to the process creates a bonding experience between you and your clients.

Speaking of annual update courses, I have had excellent experience with Pronto Tax School.  They have a wide range of affordable online tax courses to help you fulfill continuing professional education requirements. 

Check out the courses at Pronto Tax School.  I highly recommend them.  In addition to offering high quality content, the customer service the Pronto Tax School staff have provided me has been like a breath of fresh air.  They treated me like a human being rather than dollar signs.  So, I still take their courses, in addition to authoring these blogs on the Pronto Tax School website to help my fellow tax professionals find increased career success and fulfillment. 

Download Pronto’s Free New eBook

With this in mind, I’d like to offer a new eBook written by Mr. Andy Frye of Pronto Tax School.  This free eBook describes how a motivated person could earn a year’s wages in just 100 days of hard work.  Also explained are the two most common career paths for new tax preparers.  This free information is extremely informative and an easy read. 

If you are interested in income tax preparation you can visit the Pronto Income Tax School Facebook group called The Tax Preparer Teamwork Group.  Join the group and enjoy a professional community there to help you succeed.

You’ll find that the Pronto Tax School Staff and their Facebook group members are friendly and willing to answer your questions.