A quick note on a specific opportunity for 2020:
Usually, you can only take a deduction for charitable contributions if you itemize your deductions. There have been a lot fewer people doing this the last couple of years, because the standard deduction went up significantly (now $24,800 for married couples or $12,400 for singles for tax year 2020) and the state income/real estate tax deduction was capped at $10,000.
For 2020 only, as part of the CARES Act in March, Congress instituted a $300 "above-the-line" deduction for charitable contributions. This means you can get this deduction even if you do not otherwise itemize.
A couple of things to keep in mind about all contribution deductions:
- Your contribution must be to an entity classified by the IRS as a Sec. 501(c)(3) entity. Most charities will have done such, including most churches and other houses of worship. However, this specifically excludes political campaigns, political action committees ("PACs") and other organizations whose primary purpose is political.
- You must make the contribution in cash (not in kind).
- If you make a single contribution of $250 or more, you must have a "contemporaneous written acknowledgement" (aka a receipt) in your records. For contributions less than that, you must be able to substantiate the gift from your own records, such as with a bank or credit card statement.
If you don’t plan to itemize but have already made charitable contributions up to $300, let your accountant know. If you haven't made any charitable contributions this year, here is a unique opportunity to contribute up to $300 and get a tax deduction without worrying about whether you're itemizing!
Photo by Markus Winkler on Unsplash