Reminder: The IRS has provided taxpayers with the ability to deduct up to $300 in charitable donations this year
The Internal Revenue Service (IRS) provided taxpayers with a friendly reminder that there is a special provision that will make sure people can easily deduct up to $300 in donations this year, as long as the charity they select qualifies. These cash donations, which must be made before December 31, 2020, are the result of a special tax law change made earlier in the year.
The Coronavirus Aid, Relief and Economic Security (CARES) Act, which was enacted earlier this year, provides numerous temporary tax changes that will help charities. The particular inclusion regarding the $300 deduction was designed for people who take the standard deduction, rather than itemized.
Almost all taxpayers (9 out of 10) take the standard deduction and could qualify for this new deduction. Tax-year 2018, the most recent year for which figures are available, showed that more than 134 million claimed the standard deduction. That’s just over 87%!
What does this mean?
By allowing individual taxpayers to claim a charitable donation made in 2020 of up to $300 cash, the deduction lowers both adjusted gross income and taxable income. This means that there are tax savings for those making donations to qualified tax-exempt organizations.
How do I know if the charity I chose qualifies?
The IRS provides a Tax Exempt Organization Search (TEOS) tool on their website. Most cash contributions qualify, but some do not. It is best to check the IRS website to be sure.
What is considered a cash donation?
These donations include check, credit card or debit card, and of course, cash. Not included? Securities, household items or other property.
What do I do?
If you are going to donate to a charity this year, make sure you keep detailed records. There are recordkeeping laws and rules that apply to all taxpayers claiming a deduction for charitable contributions. The most common records are receipts or a letter of acknowledgement from the charity organization. The IRS provides recordkeeping laws and rules on their website (see Publication 526).
On the charity side, the CARES Act has included temporary provisions that will help charities such as higher construction limits for corporations, businesses that give food inventory to food banks, individuals that itemize deductions, plus more eligible charities.
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