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The IRS has made a special provision that will allow more people to easily deduct up to $300 in donations to qualifying charities this year. Following special tax law changes made earlier in 2020, cash donations of up to $300 made before December 31, 2020, are now deductible when people file their taxes in 2021.
The Coronavirus Aid, Relief and Economic Security (CARES) Act, enacted last spring, includes several temporary tax changes helping charities, including the special $300 deduction designed especially for people who choose to take the standard deduction, rather than itemizing their deductions.
Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify for this new tax deduction. In tax-year 2018, the most recent year for which complete figures are available, more than 134 million taxpayers claimed the standard deduction, just over 87% of all filers.
Under this new change, individual taxpayers can claim an “above-the-line” deduction of up to $300 for cash donations made to charity during 2020. This means the deduction lowers both adjusted gross income and taxable income – translating into tax savings for those making donations to qualifying tax-exempt organizations.
Before making a donation, the IRS recommends checking the Tax Exempt Organization Search (TEOS) tool on IRS.gov to make sure the organization is eligible for tax-deductible donations.
Cash donations include those made by check, credit card or debit card. They don’t include securities, household items or other property. Though cash contributions to most charitable organizations qualify, those made to supporting organizations and donor-advised funds do not.
By law, special recordkeeping rules apply to any taxpayer claiming a charitable contribution deduction. Usually, this includes obtaining a receipt or acknowledgement letter from the charity, before filing a return, and retaining a cancelled check or credit card receipt.
Wondering if your charitable giving qualifies toward the $300 charitable tax credit this year? Call or email the T.A.C. offices to find out!