It’s December, and if you haven’t yet made your charitable contributions this year, now is the time, especially since 2020 contributions are subject to new, more favorable tax treatment.
According to the IRS, just about every taxpayer (close to nine in 10) does not itemize deductions -- they take the standard deduction instead. If that describes you, did you know that this year you can get a tax deduction for a charitable contribution, something that normally calls for a Schedule A?
A special provision of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted last spring, enables taxpayers to get a deduction even if they don’t itemize.
Specifically, in 2020 you can make a cash donation of up to $300 and deduct that amount on your 2020 tax return when you file your return in 2021.
“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,” according to the IRS. “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.” You can find more information about the $300 deduction at tinyurl.com/y4zvpj5z.
As Edward T. Killen, the acting commissioner of the Tax Exempt and Government Entities division of the IRS, pointed out in the IRS executive column “A Closer Look”: “This could help taxpayers when they file their taxes in 2021 -- and help many organizations across the country as they try to help people coping with the coronavirus. Many charities are struggling this year, and donations for many are down.”
What’s a “cash” donation? A check, credit card or debit card payment to the charity. What is not cash? Things like securities, household items or other property.
What is considered a qualified charity? Check IRS Publication 526, “Charitable Contributions,” at tinyurl.com/y6bhnuna. You also can use the IRS Tax Exempt Organization Search (TEOS) tool at tinyurl.com/y84b96ja. Scroll down the page until you find the blue “button.”
In “A Closer Look,” Killen encouraged taxpayers to use the TEOS tool, saying: “All too often, we see fly-by-night organizations pop up trying to take advantage of natural disasters and people’s good will in the name of charity, when in reality they don’t have tax-exempt status. This can damage the reputation of noble charitable organizations and undermine confidence in charitable giving at the very time where generosity and help are most needed.”
What if you do plan to itemize? In 2020, again thanks to the CARES Act, you can deduct qualified charitable cash contributions on Schedule A as an itemized deduction up to 100 percent of adjusted gross income (AGI). Normally, the deduction is limited to a percentage (usually 60 percent) of the taxpayer’s AGI. If you are planning on using Schedule A, be sure to talk with your accountant first.
Finally, don’t forget qualified charitable distributions (QCDs), which I discussed in October. If you are 70 1/2 years old or older, you can withdraw up to $100,000 from your IRA (individual retirement account) to go to charity. Unlike IRA required minimum distributions (RMDs), which are suspended for 2020, QCDs are nontaxable IRA withdrawals. If you would like a copy of the October QCD column, please email me at firstname.lastname@example.org.
Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (email@example.com). Please visit www.juliejason.com.
DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION