As we approach the end of each year, giving is often our minds. However, with close to 90% of US taxpayers now taking the standard deduction on their tax return, is there still also a financial incentive to give to charity?
Good news: in a recent press release, the IRS reiterated a special tax provision that will allow more Americans to “easily deduct $600 in donations to qualifying charities on their 2021 federal income tax return.”
The Taxpayer Certainty and Disaster Tax Relief Act of 2020 states that individuals can claim a deduction of up to $300 for cash contributions made to qualifying charities during 2021. The maximum deduction amount is $600 for married individuals filing joint returns. Under normal circumstances, charitable deductions are reserved for those who itemize their tax deductions. However, this temporary law permits those that take the standard deduction to claim an additional limited deduction — for cash contributions made to “qualifying” charitable organizations — on their 2021 federal income tax return.
The types of contributions that qualify are cash, check, credit card or debit card as well as amounts incurred by an individual for unreimbursed out-of-pocket expenses in connection with their volunteer services to a qualifying charitable organization. These expenses all qualify as “cash” contributions.
What does not qualify as a cash contribution: the values of volunteer services, securities and household items and other property. Additionally, only cash gifts to qualified charities are eligible for this deduction.
If you’re wondering if your cause qualifies, you can search for qualified organizations here. https://www.irs.gov/charities-non-profits/search-for-tax-exempt-organizations