Charitable deductions listed for 2020

By Andrew Zashin*

When Congress passed the Coronavirus Aid, Relief and Economic Security Act in late March, media attention focused primarily upon newly-created stimulus funds and expanded unemployment benefits. As a result, the CARES Act also temporarily expanded the tax benefits associated with charitable contributions for the individual taxpayer.

Traditionally, taxpayers fell into one of two categories with respect to the financial implications of making charitable contributions: those who elected to use a standard deduction and those who itemized their deductions. In years past, the standard deduction taxpayer did not receive a tax benefit for contributing to a public nonprofit or charitable organization.

In other words, while the standard deduction taxpayer contributed to a meaningful public organization of their choosing, said donation provided no financial benefit to the taxpayer because the donation did not reduce the tax-payer’s adjusted gross income. Conversely, taxpayers who itemized their deductions were able to make deductions for charitable cash donations but only up to 60% of their AGI.

So what has the CARES Act done with respect to charitable contributions? Standard deduction taxpayers may now deduct up to $300 per taxpayer ($600 for a married couple) from their AGI if they make a qualified cash contribution to a public charity during 2020. By the taxpayer lowering their AGI, the taxpayer reduces their taxable income and thereby reduces their federal tax obligation. The benefit increases for taxpayers who itemize their deductions. Itemized deduction taxpayers are permitted to deduct donations up to 100% of their 2020 AGI. Accordingly, a taxpayer who itemizes deductions could conceivably donate 100% of their AGI to public charity and thus owe zero income tax for the year 2020.

It is important to note that restrictions do apply and should be carefully considered before donating. First, contributions of non-cash property do not qualify under the CARES Act. Further, the contribution in question must be made to a public charity. Public charities include foundations organized or created in the United States and operated exclusively for charitable, religious, educational, scientific or literary purposes.

What is not included? For the most part, donating to family foundations, corporate foundations and private non-operating foundations will not provide taxpayer with a qualifying charitable deduction under the CARES Act. If you are unsure whether the charity you wish to donate to is a public charity, you can easily check by accessing the Internal Revenue Service’s charities and nonprofit page by visiting bit.ly/33Fqtdc.

Resources such as the aforementioned website should be carefully utilized and consulted when making a decision regarding charitable contributions. For example, illegal and fraudulent charities do exist and have been created simply to scam well-intentioned donors. A common scheme includes the creation of an organization with an intentionally similar name as a legitimate charity in an effort to fool unsuspecting donors to contribute to them. For example, while Black Lives Matter is a legitimate public charity, the Black Lives Matter Foundation is not a public charity.

While the notion of charity in itself is an excellent reason to donate to the cause of your choice, the tax benefits provided under the CARES Act provide additional incentive to individuals. If you plan on making a financial donation and wish to maximize the tax benefits afforded under the CARES act, make sure you do so wisely by researching the organization prior to your commitment.

This article originally appeared as a column for the Cleveland Jewish News.

2023-11-10T13:38:08-05:00September 23rd, 2020|CARES Act, Charitable Donations, Deductions|

What you need to know about property rental, ownership in COVID-19 era

By Andrew Zashin*

At this point, the Coronavirus Aid, Relief, and Economic Security Act is old news. Passed on March 27, 2020, the legislation was intended to provide some measure of relief to Americans as the COVID-19 pandemic began to take hold in the United States. Of course, there are divergent opinions on how well it met this goal, but it is important to note that even as most major media outlets are reporting surging infection numbers many of its provisions are expiring imminently.

Among those are the protections set out for homeowners in Section 4022. Owners of dwellings for one to four families have the right to seek loan forbearance for up to 180 days, with a possible extension of an additional 180 days, upon a showing that he or she is “experiencing a hardship due, directly or indirectly, to the COVID-19 emergency.” During the forbearance period, no additional fees, penalties or interest can be assessed.

If the mortgage is current at the time forbearance is granted, the loan would be reported to all credit reporting agencies as current. However, a delinquent account would be reported as such, despite forbearance. Obviously, forbearance is quite different than forgiveness, and the loan must still be repaid. However, the Federal Housing Administration,the Department of Veterans Affairs and the U.S. Department of Agriculture have repayment options to ease the burden of managing the missed payments, so that owners will not be stuck with large lump sums due at the end of the forbearance period.

Section 4023 offers protection to owners of multifamily dwelling owners with five or more dwelling units). Owners with federally-backed loans who are experiencing pandemic related financial hardship can request loan forbearance for between 30 days and 90 days. However, the right to request forbearance under this section expires at the end of the pandemic or Dec. 31, 2020, whichever occurs first, so timing under this provision is particularly important.

Section 4024 of the CARES Act addresses residential tenants. Specifically, it provides for a moratorium on eviction filings if the property is subject to a federally-backed mortgage, or if the property is part of certain federal housing programs. This provision was originally set to expire 120 days after March 27. Evictions for reasons other than nonpayment, such as violations of other lease provisions, are still permitted. Some states have extended further protections, but in Ohio it has been left to the separate localities to determine if and how to handle evictions.

No doubt we are living in strange and unusual times. Renters are concerned with making next month’s rent. Property owners are concerned about making that next month’s mortgage payment. Meanwhile, landlords are very concerned about their own rental collections and subsequent ability to pay their own bills. Some federal agencies have indicated an extension of some programs, but it’s not clear if and for how long these protections will ultimately continue, or if any protections will be extended here in Ohio for tenants and property owners who don’t qualify. If you find that you need help getting tenants out or paying your bills, be sure to contact your attorney and/or lender.

This article originally appeared as a column for the Cleveland Jewish News.

2023-11-10T13:38:09-05:00June 26th, 2020|CARES Act, COVID-19, Pandemic|
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