How to get a tax deduction for 2021 donations if you don’t detail
If you’re one of the millions of Americans who gave to charity in 2021, you can still claim a deduction on that year’s tax return.
There is a cash gift deduction of up to $300 for single filers, and couples filing jointly can score up to $600, according to the IRS.
And it’s easier for more filers to qualify for the 2021 charitable tax relief, according to financial experts. Here’s why.
Introduced as part of the CARES Act of 2020, Congress has given charities a boost by encouraging Americans to donate cash. Lawmakers extended the delisting for 2021.
“This is a unique opportunity to take advantage of a temporary tax benefit,” said Juan Ros, certified financial planner at Forum Financial Management in Thousand Oaks, Calif.
Charitable write-off is not “above the line”, so it will not affect adjusted gross income. But it’s not an itemized deduction either.
With nearly 90% of filers using the standard deduction, it can be difficult for the average American to claim tax breaks for small charitable donations, as they must itemize to receive the benefit.
However, the temporary law allows those who take the standard deduction of $12,550 for single filers or $25,100 for married filers to qualify in 2021.
“This means anyone can deduct a cash contribution to a qualifying charitable organization even if the taxpayer is unable to itemize the deductions,” said David Haas, CFP and president of Cereus Financial Advisors at Franklin Lakes. , New Jersey.
More tax breaks
While tax breaks of up to $300 or $600 are a plus for many filers for 2021, those who itemize deductions can get a bigger write-off by donating other types of assets in 2022.
For example, if someone has valued stocks or other investments held for more than a year in their taxable portfolio, they might consider transferring those assets to charity.
Here’s why: the donation can avoid capital gains tax of 0%, 15% or 20% for 2022, depending on income. For this to work, investors must donate the assets directly to the organization rather than selling and donating the proceeds.
“This is a great opportunity for someone who has invested in an asset that has performed well and wants to diversify their holdings but doesn’t want capital gains to be affected,” said Danielle Harrison, CFP, fee-only financial planner and founder of Harrison Financial Planning in Columbia, Missouri.
Of course, there are many factors to consider and a tax professional can advise you on the optimal strategy.