Special 2021 Deduction For Non-Itemizers Giving To Charity

Giving Tuesday is coming up at the end of November, so here’s a special reminder about this year’s “bonus” charitable deduction. As part of the CARES Act in 2020, Congress authorized a special charitable deduction for 2020 only for people who aren’t able to itemize due to the standard deduction being higher than their itemized deductions. The limit was $300, and that was the case whether Single, Head-Of-Household, or Married Filing Jointly. The Taxpayer Certainty and Disaster Tax Relief Act of 2020, passed late last year extended this deduction into 2021 and doubles it to $600 for joint filers.

As with last year, to qualify, the donation must be in cash, it must be to a qualifying organization (which is the same as for charitable donations as itemized deductions), it must be made by 12/31 (2021 this year), and appropriate records must be kept. As with itemized deductions, you can check whether the organization qualifies using the IRS’s Tax Exempt Organization Search. A $300 or $600 deduction may not sound like a lot, but many people have already made, or are about to make, some cash contributions for friends, colleagues, or family members that are raising money for various organizations. If you’re going to make the contribution regardless of the tax benefit, you might as well take the tax benefits that are available. In most cases, substantiation simply requires an acknowledgement from the organization (including stating that you received no benefits for your donation) and a cancelled check or credit card statement. (For detailed record keeping requirements and special cases, see Charitable Contributions – Deductions & Recordkeeping in the blog archives.) So save those “thanks for your contribution” acknowledgement emails and keep a running list of your cash donations this year, whether you itemize or not. They will come in handy to the tune of up to $300 or $600 in deductions at tax prep time.

Special 2020 Deduction For Non-Itemizers Giving To Charity

It’s Giving Tuesday, so here’s a special reminder about this year’s “bonus” charitable deduction. As part of the CARES Act, Congress authorized a special charitable deduction for 2020 for people who aren’t able to itemize due to the standard deduction being higher than their itemized deductions. The limit is $300, and that’s the case whether your Single, Head-Of-Household, or Married Filing Jointly. To qualify, the donation must be in cash, it must be to a qualifying organization (which is the same as for charitable donations as itemized deductions), it must be made in 2020, and appropriate records must be kept. As with itemized deductions, you can check whether the organization qualifies using the IRS’s Tax Exempt Organization Search. A $300 deduction may not sound like a lot, but many people have already made, or are about to make, some cash contributions for friends, colleagues, or family members that are raising money for various organizations. If you’re going to make the contribution regardless of the tax benefit, you might as well take the tax benefits that are available. In most cases, substantiation simply requires an acknowledgement from the organization (including stating that you received no benefits for your donation) and a cancelled check or credit card statement. (For detailed record keeping requirements and special cases, see Charitable Contributions – Deductions & Recordkeeping in the blog archives.) So save those “thanks for your contribution” acknowledgement emails and keep a running list of your cash donations this year, whether you itemize or not. They will come in handy to the tune of up to $300 in deductions at tax prep time.

Charitable Contributions – Deductions and Recordkeeping

I receive lots of questions around tax time about what charitable contributions are deductible and what records need to be kept to validate the deductions.  Here’s my brief attempt at the basics of donating cash, donating property, or performing charitable services through which you incur expenses:

Cash

1)      If you make a donation in cash that is under $250, an acknowledgement from the organization is not required as long as you have a bank record of the transaction (account statement, credit card bill).  The record must include the name of the charity and the amount of the contribution.  Alternatively, you can have a receipt from the organization, or a payroll record if you donated through a payroll deduction.

2)      If you make a donation in cash that is $250 or over, you must receive acknowledgement from the organization dated prior to the due date of your tax return, and it must state:

  1. The amount of cash and a description (but not the value) of any property other than cash contributed.
  2. Whether the organization receiving the donation provided any goods or services in consideration, in whole or in part, for any cash or property that was contributed.  This is important.  A simple letter saying you donated $1,000 to the organization will not qualify because it doesn’t say specifically that you didn’t receive anything in return for the donation.  In a recent court case, a couple contributed $25,171 to their church over multiple donations through the year, most of which were over $250.  At the end of the year, they received a letter stating the total (and thanking them for their generosity), but the letter didn’t include a statement that said they received nothing in return.  The IRS challenged the deduction, it went to court, and the Tax Court sided with the IRS since this clearly violated the rules for taking a deduction.
  3. A description and good faith estimate of the value of any goods or services received by the donor or if such goods and services consist solely of intangible religious benefit.

Property

If you donate property to a qualified charitable organization, you generally can deduct the fair market value of the property.  This is not the amount you paid for it.  It is the amount the property is worth at the time of the donation (generally not to exceed the value you paid for it).  The recordkeeping rules differ based mainly on the deductible value of the donation:

1)      If the deductible value is less than $250, you need a receipt from the organization showing the name of the organization, the date and location of the donation, and a reasonably detailed description of the property (“1 large bag of clothes” will not do).  Note, the IRS says that you do not need a receipt for donations < $250 if it is impractical to get one (like an unattended drop box).  You must also keep records of the donation which include:

  1. The name and address of the organization
  2. The date and location of the donation
  3. A reasonably detailed description of the property
  4. The fair market value of the property and how you determined it (i.e. thrift shop value, comparative sales, etc.)
  5. Your cost basis in the property
  6. The amount you claim as the deduction
  7. The terms of any conditions attached to the donation.

2)      If the deductible value is between $250 and $500 (inclusive), you need:

  1. the information from #1 above, AND,
  2. a written acknowledgement from the organization detailing the property donated, whether you received anything in return or not, and a description and good faith estimate of anything you did receive in return.  This must be received before the due date of your tax return.

3)      If the deductible value is over $500 but not over $5,000, you need:

  1. the information from #2 above, AND,
  2. your own records showing how you obtained the property, the approximate date you obtained the property, and your cost basis in the property.

4)      If the deductible value is over $5,000, you need:

  1. the information from #3 above, AND,
  2. a qualified appraisal

Special rules exist for cars, boats, and airplanes which include receiving a 1098-C from the charitable organization and your deduction being limited to the amount for which your donated item was sold by the organization (e.g. if you donate your car with a blue book value of $2k to your church and they sell it for $750, your deduction is limited to $750).

Expenses

You can deduct expenses you incur in connection with performing charitable work as long as the expenses are:

1)      not reimbursed,

2)      directly connected with the services you provided,

3)      expenses you only incurred because of the services you provided, AND

4)      not personal, living, or family expenses.

The cost of travel to perform charitable services is deductible including the cost of driving your own car at the annual charitable mileage deduction amount as posted by the IRS (14 cents per mile for 2012 and 2013).  Meals are generally only deductible if you’re required to be away from home overnight.

Note: you cannot deduct the value of your time in performing or traveling to/from charitable services.

See IRS Publication 526 for more information.