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Relief Bill Modestly Expands Universal Charitable Deduction

Posted on Dec. 22, 2020

The COVID-19 relief package passed by Congress builds on a recent expansion of the tax break for donations to charities, but not by as much as the charitable giving community had hoped.

The relief bill would enhance the universal charitable deduction available to non-itemizers that was established by the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136). It would set the deduction at $300 for individuals and $600 for joint filers. Under the CARES Act, the deduction is $300 for both individuals and joint filers.

The bill would also extend the universal deduction through 2021 at a total cost of $3.5 billion over 10 years, according to a Joint Committee on Taxation estimate.

Representatives of the nonprofit sector had asked Congress to go further to encourage greater charitable giving at a time when charities’ services are in greater demand because of the pandemic.

In a December 9 letter to congressional leaders, members of the Charitable Giving Coalition expressed support for a Senate proposal to increase the deduction to $600 for single filers and $1,200 for joint filers and the Universal Giving Pandemic Response Act (S. 4032, H.R. 7324), which would raise the amount to about $4,000 for individuals and $8,000 for couples.

The coalition wrote that “the temporary above-the-line charitable deduction enacted in the CARES Act is a policy that has encouraged Americans to give more.”

Tim Delaney of the National Council of Nonprofits praised the most recent relief legislation for extending the universal charitable deduction through 2021.

But the overall bill is far from enough, he said in a statement.

Congress and the Administration have failed the American people by not acting early enough or doing enough,” Delaney said. “It took far too long to pass a bill that does not do enough for our communities. Congress must pass more comprehensive relief immediately upon returning to Washington in 2021."

The relief bill would also increase the section 6662 penalty for overstating qualified charitable contributions from 20 percent to 50 percent.

Brian Flahaven of the Charitable Giving Coalition praised the relief bill’s extension of the deduction.

“Extending the availability of the temporary universal charitable deduction through 2021 will allow all Americans to continue receiving a benefit for at least some of their charitable gifts during a year when needs are high,” Flahaven said in a release.

Flahaven added that the coalition will work with Congress to reintroduce legislation to make the universal charitable deduction permanent.

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