Deduct Charitable Contributions Up to $300 in Cash.
Charitable contributions in cash of up to $300 made this year by December 31, 2020 are now deductible without having to itemize when filing taxes in 2021.
The Coronavirus Aid, Relief and Economic Security Act (The CARES Act) includes several temporary tax law changes to help charities. This includes a special $300 deduction designed especially for people who take the standard deduction, rather than itemizing their deductions.
This change allows individual taxpayers to claim a deduction of up to $300 for cash donations made to charity during 2020. This deduction lowers both adjusted gross income and taxable income, resulting in tax savings for those making donations to qualifying tax-exempt organizations.
To Whom Can You Give?
Before making a donation, taxpayers should check the Tax Exempt Organization Search tool on IRS.gov to make sure the organization is eligible for tax deductible donations.
Cash donations include those made by check, credit card or debit card. They don’t include securities, household items or other property.
The CARES Act includes other temporary allowances designed to help charities. These include higher charitable contribution limits for:
- corporations
- individuals who itemize their deductions
- businesses that give food inventory to food banks and other eligible charities
For more information, visit the Coronavirus Tax Relief page of IRS.gov.
Recordkeeping rules apply to any taxpayer claiming a charitable contribution deduction. This includes getting a receipt or acknowledgement letter from the charity before filing a return and retaining a cancelled check or credit card receipt.
Contributions in Atlanta and the State of Georgia
The Community Foundation for Greater Atlanta is excited about the increased charitable contribution limits the CARES Act for those who itemize. According to their director, A donor who uses all of his available deduction for qualified gifts would pay no federal income tax in 2020!
According to the United Way of Greater Atlanta, donors who take the standard deduction may also take an “above-the-line” deduction for up to $300 in charitable donations given in 2020. This effectively allows a limited charitable deduction to taxpayers claiming the standard deduction. For example, if you take the standard deduction and give $300 to charity, you will get a $300 tax break in addition to the standard deduction.
The University of Georgia comments on the CARES Act, noting that gifts to Donor Advised Funds (DAFs) or Supporting Organizations (SOs) are not eligible for this special election, but a Charitable Gift Annuity (CGA) funded with cash would be. According to UGA, this could make 2020 an ideal year to set up a CGA that pays donors for life.
In Conclusion
Whether taxpayers are supporting natural disaster recovery, COVID-19 pandemic aid or another cause that is personally meaningful to them, their charitable donations may be tax deductible. The CARES Act makes the charitable contribution deductions more available, and more powerful, for 2020 returns filed in 2021.
Our firm encourages the public to support their local charities in Atlanta and greater Georgia, whenever possible.
Founded by Gary Massey, CPA, Massey and Company is a boutique CPA firm located in Atlanta, GA, serving the needs of small businesses, business owners and individual taxpayers. Our services include tax preparation, tax planning, taxpayer representation, IRS audits, monthly bookkeeping and accounting.
