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Why $300/Employee/Year is the Best Matching Donation Policy [CARES Act Charitable Tax Explained]

Joel Pollick
Posted by  Joel Pollick on Sep 13, 2021
If you are launching a matching donation program, we recommend setting a $300/employee/year budget to encourage employees to take advantage of the charitable tax incentive established by the CARES Act.

3 minute read

 
The $2 Trillion COVID-19 Stimulus Package--the CARES Act--was passed into law on March 27th, 2020, and benefits are still in effect. The act was implemented to help the country #CombatCOVID; one significant way it continues is by incentivizing charitable giving--which is incredibly important as the nation’s nonprofits support the most vulnerable communities and first responders on the front lines.

What does the bill say?
Section 2204. Allowance of partial above-the-line deduction for charitable contributions. The provision encourages Americans to contribute to churches and charitable organizations in 2020 by permitting them to deduct up to $300 of cash contributions, whether they itemize their deductions or not (Source: Senate Finance Committee).

What does it mean?
Giving is now partially pre-tax! Now individuals can donate $300, deduct that amount from their taxable income, and STILL take the standard deduction.

Why set a matching budget at $300/employee/year?
A simplified example.

Let’s say you take home $1,000 a year--so $1,000 is your taxable income.

Before, giving $300 would have been altruistic but done nothing to reduce your taxes. Uncle Sam would calculate your tax bill based on that $1,000 in taxable income. You would then take the standard deduction, subtract that from your tax bill, and pay Uncle Sam the net (or receive a refund if the net is negative).

Now, giving $300 is both altruistic and financially beneficial! You can deduct that $300 from your taxable income, which means Uncle Sam would calculate your tax bill based on $700 ($1000 - $300) instead of $1,000. You would then also take the standard deduction, which is now being subtracted from a smaller number, and pay Uncle Sam the net (or receive a refund if the net is negative).

Hopefully, this example shows you why it’s a no-brainer to donate at least $300 a year and incentivize employees to do so as well through your company's matching donation program.

Want to dive deeper into the CARES Act? Find a full explainer here or contact our social impact experts at contact@percentpledge.org to learn more.
 
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Joel Pollick

Written by Joel Pollick

Founder & CEO @ Percent Pledge. Expert in workplace giving, volunteering, and employee engagement for fast-growing companies.

Want to learn more about implementing a matching donation program? Request a demo here.