New special tax deduction
Many people don’t realize there is a special tax deduction available through Dec. 31, 2020.
The deduction is for up to $300 for cash donations made to qualifying charities.
Many charities are struggling this year due to a decrease in donations. This is a result of the financial impact that COVID-19 has had on many people.
The Coronavirus Aid, Relief and Economic Security (Cares) Act, was enacted by Congress earlier this year. It includes several temporary tax changes for helping charities. It includes a special $300 deduction for people who take the standard deduction. Normally, you can’t deduct donations to charity unless you file Schedule A and itemize your deductions.
Almost 90% of taxpayers now take the standard deduction rather than itemizing as a result of the 2018 tax changes. Consequently, nearly 90% of taxpayers may be able to benefit from this special deduction.
If you make a cash donation to a qualifying charity before December 31, you can take the deduction even if you take the standard deduction.
Over 134 million taxpayers took the standard deduction in 2018, so this deduction could help many charities in 2020.
Unfortunately, many fly-by-night organizations are likely to try to take advantage of your generosity in the name of charity. However, they may not have tax-exempt status, or it could be con artists who are trying to take advantage of you.
The IRS has a tool that allows you to determine if a charity qualifies for the special deduction. Use the Tax-Exempt Organization Search (TEOS) tool on IRS.gov to ensure an organization is eligible for the tax-deductible donations.
It’s important to keep paperwork when you donate. You will need to get a receipt or acknowledgment letter from the charity before filing your tax return. Additionally, keep a copy of the canceled check or credit card receipt.
The Cares Act also created other temporary tax laws that are designed to help charities. Individuals and corporations have higher charitable contribution limits, which will benefit many charitable organizations.
“As the difficult year of 2020 comes to a close, there is still time to make a difference in many different ways. We want you to know that one of those can be helping a charitable group, and at the same time helping your tax situation when you file in 2021,” said Edward T. Killen, Acting Commissioner of the Tax Exempt and Government Entities (TE/GE) division of the IRS.
Hopefully, both you and a charitable organization will benefit from your ability to take this special deduction this year.
David Zubler is a tax accountant and Enrolled Agent representing clients before the IRS with over 25 years of tax experience. He is the author of four tax books and is the founder and president of Your Tax Care. The company provides business and tax education to the public at its website, YourTaxCare.com. David can also be contacted by email at firstname.lastname@example.org.