With current tax laws changing specifically for charitable contributions, it is important for taxpayers to know what they are eligible for before filing their tax return. Charitable contribution cash donations of up to $300 made by December 31, 2020, are now deductible without having to itemize when filing taxes for 2021.
Optima Tax Relief reviews these new changes and how they will affect filing your taxes moving forward.
The Coronavirus Aid, Relief Economic Security Act involves several temporary tax law changes that help charities. This act includes a $300 deduction that was created to assist individuals who decide to take the standard deductions instead of itemizing their deductions.
This change now allows taxpayers to claim a deduction of up to $300 for cash donations that were made to a charity in 2020. This deduction lowers both adjusted gross income and any other additional taxable income which could mean you qualify for a bigger refund or could help reduce your total tax liability.
Individuals should review the Tax-Exempt Organization search tool on the IRS website before making a donation to ensure the organization that they are considering donating to is eligible for tax deduction donations.
Cash donations are considered those that are made by check, credit card or debit card. Although most cash donations to charitable organizations qualify, there are some that aren’t eligible. Individuals should review Publication 526, Charitable Contributions for additional details as to whether or not their cash contributions are deductible.
The CARES Act also includes additional temporary allowances designed to assist charities. These include higher charitable contribution limits for corporations, individuals who itemize their deductions and businesses that give food inventory to food banks and other eligible charities.