The CARES Act and the Arts: A New Incentive for Charitable Giving

If you’re like me (and roughly 90% of US taxpayers), you claim the standard deduction when you file your income taxes each year. For those of us who don't have enough qualifying expenses (mortgage interest, property taxes, etc.) to itemize when we file, the standard deduction probably makes the most sense. Because of this, I am not able to deduct my charitable contributions, despite the fact that I donate to 501(c)(3) organizations. 

That changed this week, however, when Congress passed the CARES Act. You may be able to benefit from “above-the-line” charitable deductions up to $300 as a donor, as an artist who is fundraising, and/or as a nonprofit employee.

The CARES Act was passed by Congress in response to the ongoing COVID-19 pandemic, and includes an incentive for everyone, including those of us who claim the standard deduction, to continue and even expand our charitable giving in 2020. Every nonprofit and fiscally-sponsored project should be aware of this new incentive and seek to benefit from it during these times of extreme economic uncertainty.

This Forbes article helps summarize the changes to charitable giving for the 2020 tax year. Here are the major takeaways: 

• Those of us who do not itemize our expenses will be able to deduct up to $300 for donations made to 501(c)(3)s in addition to the standard deduction.
• Individual and corporate donors who already take full advantage of the charitable tax deduction are encouraged to be even more generous by the elimination of AGI limits for charitable deductions.

In a nutshell, the federal government has added a new benefit for individuals who do not itemize when they file their taxes AND an incentive for those who already deduct their charitable giving to encourage them to donate more this year.

Take Advantage of the CARES Act

1. Give now 

If you have job security or reliable income, plan to take full advantage of the $300 above-the-line deduction. 

The culture of giving in the United States is strong. A higher percentage of taxpayers donate to 501(c)(3)s than are able to take advantage of the charitable tax deduction each year. This means that more folks give out of the kindness of their hearts than out of any benefit they expect to receive in return. Across the country and around the globe, there are stories of hope and resilience as humans turn to each other for support in this time of great need, and this provision of the CARES Act will hopefully encourage more charitable giving by all.

2. Include the CARES Act in your fundraising pitch

If you’re a 501(c)(3) organization or fiscally-sponsored project that is actively fundraising right now, be sure to let your donor community know about this new incentive. In addition to rewarding those who already give, the CARES Act  has the potential to activate folks who’ve never made a charitable donation before. You might even consider organizing a campaign specifically around the above-the-line deduction in the CARES Act.

As always, donors should consult with their accountants or qualified tax professionals about their individual income situation and what tax breaks they can utilize. 

Here is some sample language to include in your ask letters:

Did you know? The CARES Act incentivizes charitable giving in 2020 by allowing for a deduction of up to $300 for those who do not itemize when they file their income taxes. Please consider donating up to $300 to take full advantage of this benefit.

OR

Please consider increasing the amount that you give this year. The CARES Act has eliminated the percent of AGI limits for charitable deductions in 2020. This means an expanded tax benefit for generous donors like you, whose support we need now more than ever.

You can also use some of our other template language for fundraising in difficult times. 

3. Spread the word to other artists and nonprofits

Nonprofit organizations employ almost 12 million Americans, making it the country’s third largest workforce. A 2015 study by Americans for the Arts showed that the arts nonprofit sector alone generated over $160 billion in economic activity that year. As an imperfect point of comparison, a major corporation like Boeing, whose operating expenses were a little less than $79 billion last year, stands to benefit massively from the stimulus bill. Encourage your colleagues across the sector to incorporate the CARES Act into their messaging with donors and with the artists in their networks. 

We need to stand together as an industry and make sure that we’re using all of the  resources available to us, which includes educating the sector on important developments like the changes to charitable giving made in the CARES Act. 

Additional Resources

Fractured Atlas is committed to keeping the arts and culture sector connected to the resources we all need to endure this crisis. Here are some other places to get information about emergency funding, grants, and more. 

• Community Skillshare: Financial Planning for Small & Medium-Sized Businesses During COVID-19
• Community Skillshare: Navigating Personal Finances During COVID-19
• COVID-19 & Freelancer Artist Resource
• Emergency Grants for Artists
• Emergency Resources for Artists in the Wake of COVID-19
• Paycheck Protection Program
• SBA Disaster Assistance

This article is no substitute for sound tax or legal advice. Please be sure to consult qualified professionals like accountants or attorneys. For more information on what else is in the new law, please see this Nonprofit Guide to the CARES Act.