There’s an extra special adjustment for the upcoming income tax filing season (for those who use the standard deduction) in the form of an adjustment to gross income for a deduction of up to $300 in cash charitable donations. That means, yes, it is available to you even if you don’t itemize!
The limitation on the state and local tax (SALT) itemized deductions for many has been put in place so that we all claim a standard deduction. With the SALT limitations, in the past we rarely saw an easy way to deduct (up to $300) of donations made to qualifying charities, which are generally an itemized deduction; but special tax law changes earlier this year made cash donations of up to $300 given before December 31, 2020, now deductible when people file their taxes in 2021.
Enacted last Spring, the Coronavirus Aid, Relief and Economic Security (CARES) Act provided a temporary tax change for charities dictating that the special $300 deduction is designed especially for people who choose to take the standard deduction, rather than those itemizing their deductions. The vast majority of taxpayers will now take the standard deduction and potentially qualify for this new tax deduction.
Individual taxpayers should consider claiming the “above-the-line” deduction of up to $300 for cash donations made to charity during 2020 which lowers adjusted gross income and taxable income. When doing so, make sure that you make your donations to qualifying tax-exempt organizations by year end to get your share of tax savings.
Before making a donation the IRS reminds people to check Publication 526, Charitable Contributions regarding documentation requirements and utilize the special Tax Exempt Organization Search (TEOS) tool on IRS.gov to make sure that the organization is eligible for tax-deductible donations.
To sum it up, cash donations include those made by check, credit card, or debit card. They are not available for donations of securities, household items, or other property.
We remind everyone who gives to charity to be sure to keep good records as the IRS has special recordkeeping rules that apply to any taxpayer claiming a charitable contribution deduction. Usually, this includes obtaining a receipt or acknowledgment letter from the charity before filing a return and retaining a canceled check or credit card receipt.