With the holidays right around the corner and Giving Tuesday – a global generosity movement that occurs annually in the U.S. the Tuesday after Thanksgiving – taking place yesterday, charitable giving is certainly top of mind this time of year.
However, many people have been more reluctant to make contributions to charities because they have not received the charitable deduction on their tax return, something the IRS recognizes. And because of the impact of COVID-19, charities and non-profit organizations have an even greater need for donations and have implemented a plan to encourage charitable giving.
Due to the increased standard deduction, nine in 10 taxpayers now take the standard deduction and could potentially qualify for this new tax deduction. In tax-year 2018, the most recent year for which complete figures are available, more than 134 million taxpayers claimed the standard deduction, just over 87% of all filers.
As part of the Coronavirus Aid, Relief and Economic Security (CARES) Act, legislators made several temporary tax changes, including allowing tax filers to take advantage of a special $300 charitable deduction. According to the IRS news release, this charitable deduction is designed especially for people who take the standard deduction.
If you are looking to help your favorite charity, you can make your 2020 donations by December 31, 2020, to qualify for this “above-the-line” deduction. An above-the-line deduction would lower your adjusted gross income and taxable income. Cash, check and debit card or credit card donations count towards the deduction. As a reminder, make sure to keep a record of your donation amount and the date it was paid.
With a steady stream of donations and gifts being made throughout the month of December, here’s another pertinent blog to check out on taxes on holiday gifts, or any gifts for that matter.
If you have questions about this or any other tax matter, please contact us at [email protected].