A tax deduction is not the only reason to donate to the charity of your choice. Many people are happy to give to charity, even if no tax savings is involved. Donating to charity and paying less in taxes would make those people extra happy. So, the special provision of the Coronavirus Aid, Relief and Economic Security (CARES) Act for non-itemizers to make deductible charitable donations of up to $300 will make those generous people ecstatic.
Non-itemizers are taxpayers who take the standard deduction instead of itemizing deductions on their federal income tax return. Nearly nine in ten taxpayers take the standard deduction because it results in lower taxable income and lower income tax. However, only taxpayers who itemize their deductions can typically deduct donations to a qualified charity.
Under one of the CARES Act provisions, individual taxpayers who take the standard deduction can claim a deduction of up to $300 for cash donations made to a qualified charity during 2020. Unless it’s extended, the deduction disappears in 2021. “Cash donations” means those made by check, credit card or debit card. Donations of securities, household items, or other property are not included.
Not all donations to organizations that do good work in the community are tax deductible. The organization must be considered a qualified tax-exempt entity by the IRS. Before making a donation, check the Tax Exempt Organization Search (TEOS) tool on IRS.gov to make sure that the organization is a qualified tax-exempt entity, and that donations are eligible for a tax deduction.
Check Publication 526, Charitable Contributions, and the TEOS tool for more information about qualified charities, donation limits, and how to report donations on your federal income tax return. More information about the special tax deduction for cash donations up to $300 in 2020 is at https://www.irs.gov/newsroom/special-300-tax-deduction-helps-most-people-give-to-charity-this-year-even-if-they-dont-itemize. That site also has the special recordkeeping rules for claiming a tax deduction for a charitable donation.
The CARES Act, passed by Congress last spring, included several temporary tax provisions that may not be well known. One was designed especially for people who do not itemize deductions on their income tax return and who donate to a qualified charity. The deduction of up to $300 for cash donations made to a qualified charity is only available during 2020, unless extended by Congress. Non-itemizers will want to jump on this one-time opportunity to donate to charity and pay less in taxes.