 Hello and welcome to the session. This is Professor Farhad in which we look at charitable cash contribution under the CARES Act of 2020 and under the Tax, Cuts and Jobs Act of 2017. The reason I like to show you 2017 is to show you where the changes were made. This way it makes sense to you, especially if you learned recently the Tax, Cuts and Jobs Act. As always, I'm going to remind you to connect with me on LinkedIn and subscribe to my YouTube where I have 1,800 plus accounting or finance tax as well as Excel tutorial. On my website, farhadlectures.com is a supplemental tool. What I do is I help students pass the CPA exam. No, I don't replace your Becker, I don't replace your Roger, I don't replace your Wiley, I don't replace your Glyme. Whatever CPA prep course you are using, you would still need that CPA prep course. But what I do is I supplement, I give additional explanation for the topics so you can take advantage of your CPA course and do well on the exam. So simply put, I prepare you well for your CPA prep course because your CPA prep course nearly reviews the material with you. That's the difference between what I do, a stitch versus review. So I strongly suggest you check it out if you are interested to, if you're interested in adding 10 to 15 points to your CPA exam score. So let's take a look at the old rules under the and this is for individual. We're going to be starting with individual and we'll talk about corporations separately. Simply put, if you don't itemize, you don't get any deduction for cash contribution. Under the CARES Act, it's a slightly different rule. You're going to have a universal deduction for AGI. So you can deduct this upfront on your 1040, for AGI. And this is going to be with us, this deduction, $300 if you're single and $600 Mary Tralenzoli. So simply put, anyone can take this deduction as long as they contributed money to a public charity cash. They can take 300 or 600. That wasn't the case before, before the only way you could have taken advantage of any charitable contribution is if you itemize and many people don't itemize, especially after the Tax Cuts and Jobs Act, where they increase the standard deduction and many people like I used to itemize and I could not itemize anymore. Okay. Now, for individuals who itemize, so you have to understand we have people that don't itemize. This is what happened. Now, people that itemize under the old rule, you could have took 60% of your AGI if you made any contribution in cash under the new rule. If you itemize for 2020, you can take up to 100% of your adjusted gross income. What happened if you contribute more? If you contribute more, you can, any access, you can carry it for five years. And remember, the, the contribution has to be made to a public charity. In other words, the old limitations still apply to private foundation and donor advice fund where you where you can contribute limited to 30% of AGI for appreciated asset and 60% for cash. So the old rules would still apply. What about for corporations? For corporation, the old rules is you can deduct up to 10% of your adjusted gross income. Under the CARES Act, they increased it. Again, why are we doing so? Think about why? Well, the reason they're increasing it because of COVID, they want individuals, they want corporation to contribute more. Why? Because it's going to help their fellow human being who are suffering because of the COVID. Now, when I prepared my Tax Cuts and Jobs Act lectures of 2017, I was like, great, I don't have to revisit this until 2025 because there should be no changes. But because of the COVID, we have the CARES Act. Now, remember, if Biden becomes a president, who knows, they may change the tax rules again. I do embrace changes. Why? Because the more changes there are, the better for us as CPAs. I'm looking for it from a selfish perspective. As a future CPA, you have to understand, you have to embrace change, you have to love change, you have to babysit change. It's your best friend. Because when change occur, people look at you as the expert, you're the CPA, you know what's going on so you can increase your billing. That's why change is good. So don't be intimidated by change. Also, contribution of food by corporation like food like supermarkets or Panera Bread, you could have took up to 15% of AGI. Now, they also increased it to 25%. Obviously, for obvious reasons, they want supermarkets and restaurants to contribute to food banks because people are using food banks. They lost their job. They need food to eat. They need the extra cash. Therefore, contribute to food banks and we'll give you a deduction. Let's take a look at few CPA questions or what you should see on the exam. Adam is a single taxpayer who does not itemized, earned 4,000 in wages, incurred 2,000 in undreimbursed employee business expense, paid 500 as interest on the student loan and contributed 200 in cash to a public charity. What is Adam's adjusted gross income? So how do we compute adjusted gross income with start with income, 4,000, incurred 2,000 and undreimbursed employee expenses. Can Adam deduct this? Not at all. I mean, that's a lot of expenses. I wouldn't have worked at that job because, you know, you spent 2,000 for undreimbursed employee expenses. Can Adam deduct his 500? Of course he can. Student loan is deductible. There's a limit, but the limit is in the, it's like in the 60s and 70,000. So you don't have to worry about the limit and contribute a 200 to a public charity. Now, he doesn't itemize. Adam doesn't itemize. Can he still take the 200? And the answer is yes, because a single you can take up to 300. Therefore, the Adam's adjusted gross income is 3,300. We have to remember the new rule. The new rule is as a single, although you don't itemize, you get up to $200 in public up to 300 if you're single. Here, Adam only contributed 200. That's fine. Let's take a look at the second question. Maggie, a single taxpayer that itemizes had 40,000 in adjusted gross income for the year. And during the year, she contributed 18,000 to her synagogue public charity. She had a $10,000 contribution carry over from her prior year synagogue contribution. What is the maximum amount of properly substantiated charitable contribution? That means Maggie got the receipts that Maggie could claim as an itemized deduction for the current year. Now, we have to be very careful. If you itemized under the old rules, you would have to take this amount times 60%. If you take this amount times 60%, you'll get 24,000. And this is this would have been the answer. That's not the answer anymore. Now you can contribute up to 100% of your adjusted gross income. Simply put, your contribution this year plus your contribution that you carried over from prior year, they are both deductible. Therefore, you can deduct 28,000. And that's huge. That makes a huge change on your return 28,000. Well, it's not likely that somebody making 40,000 contribute that much, but look, some people are generous. So who knows? Maybe Maggie is generous and that's fine. That's fine. Look at this question and this question deals with a C corporation rather than an individual. Adam C Corp had the revenue of 115 operating expenses of 90. Adam also received 30,000 dividend from a domestic corporation and is entitled to a 10,000 dividend received deduction. Adam, the corporation donated, not Adam, the corporation donated 15,000 to a qualified shareable contribution. What's the Adam's contribution? C contribution. Well, let's start with revenue 115. They received $30,000 in dividend total 145,000. Now we're going to deduct operating expenses of 90,000 and that's going to give us 55,000 and we stop right there. We don't keep on deducting dividend received deduction. So the dividend received deduction is not deducted for the purpose of charitable contribution. Therefore, at this point, we could compute times 0.25, not 10%. Remember, remember not 10% because under the CARES Act, we increase this. So if we take 55,000 times 25%, that's going to give us 13,750. So Adam can contribute 13,750 versus under the old rules. He could have only contributed 5,500. It means they have a carryover for the remaining of 1,250. And you could, they cannot take this year as a charitable deduction. As always, I'm going to invite you at the end to visit my website, farhatlectures.com for additional resources. I'm going to remind you one more time. I don't replace your CPA course. I wish I can. If I can, I will charge you more than what I will charge you now, which is I charge you a nominal fee, really less than a dollar a day. I will be there to support you through your CPA journey and I will help you substantially to pass the CPA exam. Invest in your career. It's worth it. You are making 20 to 30 year investment. Study hard. Good luck.