In previous years, if you wanted to get a tax deduction for a charitable contribution, you needed to itemize your deductions. This meant that you would need thousands of dollars in itemized expenses just to be able to claim any deductions at all. This year’s taxes, however, are different. You may be able to take some of your charitable contributions and deduct them without having to itemize.
Many people choose to take the standard deduction on their taxes, which enables them to subtract $12,400 for singles and $24,800 for people that are married and filing jointly. This is an acceptable option for many people. They would not have nearly enough deductions otherwise to come anywhere near the standard deductible amount.
The CARES Act Changed This Procedure
After the pandemic struck, Congress needed to act and help millions of people that had lost their jobs. The CARES Act, or the Coronavirus Aid, Relief, and Economic Security Act, made an exception to how you could report charitable contributions on your 2020 tax forms. Now you can get a deduction without itemizing when you give to qualified organizations.
Deduct Up to $300 without Any Deductions
This tax deduction is only available to people who choose not to itemize their deductions. Because it is “above the line,” it will reduce your adjusted gross income (AGI). This will also lower your taxes for the year by up to $300. You cannot deduct gifts that are above this amount unless you itemize.
What Are Charitable Organizations?
Qualifying for this deduction means that you must make a contribution to a charitable organization. The IRS defines these organizations as being charitable, religious, scientific, educational, or literary.
Some organizations are not qualified as charitable organizations. They include organizations that support charities, donor-advised funds (DAF), and non-operating private foundations.
Keeping Records of Your Contributions
The IRS states that any time you give a gift to a charitable organization and claim it on your taxes, you need to have a receipt for it from the organization. The receipt requirement is only valid if the gift is for a value of $250 or more. The gift can be in the form of cash, a check, or for the value of an item that has been given a good-faith estimate. A receipt is not necessary if the value is less than $250. All receipts must contain the organization’s name, a description of the property, and the value.
Other Deductible Limits Increased by the CARES Act
Besides getting the up to $300 deduction if you do not itemize, the CARES Act also increased the amounts you can deduct if you do itemize. Previously, deductions to charitable organizations could not exceed 60% of your adjusted gross income. The CARES Act raised this amount to allow individuals on their 2020 tax forms to claim up to 100% of their AGI.
The CARES Act has also increased the size of charitable gifts made by organizations for 2020 taxes. Previous limits were 10% of their taxable income, but this year, a corporation can deduct up to 25% of their contributions made to charitable organizations.
How Charitable Gifts Help
Gifts from various charitable organizations have already helped many people. Those that receive the most help are the unemployed, single mothers, pregnant women, the elderly, the disabled, those with ongoing health problems, and more. It is the gifts from individuals and organizations that not only keep their doors open but also enable many people to be helped from day-to-day.