Year-end donation reminder: special tax deduction helps most people give to charity
The Internal Revenue Service reminded taxpayers on Wednesday that a special tax provision will allow more Americans to easily deduct up to $ 600 in donations to qualifying charities on their 2021 federal tax returns.
Normally, people who choose to take advantage of the standard deduction cannot claim a deduction for their charitable donations. But a temporary change in the law now allows them to claim a limited deduction on their 2021 federal tax returns for cash contributions made to qualifying charities. Almost nine in ten taxpayers now benefit from the standard deduction and could potentially qualify.
Under this provision, filing individuals, including married individuals who file separate returns, can claim a deduction of up to $ 300 for cash contributions made to qualifying charities in 2021. The maximum deduction is increased to $ 600 for married individuals filing joint returns.
Included in the CARES (Coronavirus Aid, Relief, and Economic Security) law promulgated in March 2020, a more limited version of this temporary tax benefit originally only applied to the 2020 tax year. The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted last December, generally extended it until the end of 2021.
Cash contributions include those made by check, credit card or debit card as well as amounts incurred by an individual for unreimbursed expenses related to their volunteer services to an eligible charity. Cash contributions do not include the value of volunteer services, securities, household items or other property.
The IRS reminds taxpayers to make sure they are donating to a recognized charity. To qualify for a deduction, taxpayers must donate to a qualified charity. To check the status of a charity, they can use the IRS’s Tax Exempt Organizations Finder.
Cash contributions to most charities are eligible. But this is not the case with contributions made to supporting organizations or to establish or maintain a donor advised fund. Contributions carried over from previous years are not eligible, nor are contributions to most private foundations and most cash contributions to charitable residual trusts.
In general, a donor advised fund is a fund or account maintained by a charity in which a donor can, by virtue of being a donor, advise the fund on how to distribute or invest the monies donated. by the donor and held in the fund. A supporting organization is a charity that achieves its exempt purposes by supporting other exempt organizations, typically other public charities.
Keep good records
Special record keeping rules apply to any taxpayer claiming a charitable donation deduction. Usually this includes obtaining a receipt from the charity before filing a return and keeping a void check or credit card receipt for cash contributions.
For more details on the record keeping rules for justifying charitable donations, see publication 526, Charitable Contributions, available at IRS.gov.
Remind families of the child tax credit
Besides the special charitable contribution deduction, the IRS also encourages employers to publicize child tax credit advance payments because they have direct access to many employees and individuals who receive this credit. In particular, remind low-income workers, especially those who don’t normally file returns, that the deadline to register for these payments is now November 15, 2021. More information on the Advanced Tax Credit for children are available at IRS.gov.
For more information on other tax breaks related to the coronavirus, visit IRS.gov/Coronavirus.