Charitable Giving and Your Taxes

You can help people in need in many ways, especially with so many people going through difficult times due to the coronavirus epidemic and natural disasters like hurricanes. You may be unsure whether you have already given to charity or are thinking about giving.

What’s a Tax-Deductible Charitable Contribution (TDCC)?

Your donation could be tax-deductible if you donate cash, volunteer or give non-cash items to a 501(c). Before giving, verify that the organization you are donating to is a registered nonprofit 501(c). The IRS website can help verify that the organization you want to donate to is a 501 (c)(3). To be able to deduct your tax, you need to give to a registered nonprofit organization (not an individual).

Who can deduct a charitable donation?

If you itemize your deductions, you can usually deduct a charitable contribution to a qualified charity. In other words, people who take the standard deduction would not see any tax savings from gifts to charity. However, the Cares Act allows you to add a $300 charitable deduction to your 2020 taxes for donations to 501(c),(3) organizations even if your deductions aren’t itemized. This amount can be increased to $600 for married couples filing jointly and $300 for others. Taxpayers should keep this in mind, as nearly 90% of taxpayers now claim a standard deduction and do not itemize. They are also no longer allowed to deduct charitable donations under tax reform.

Temporarily, the CARES Act also removes the cap on cash contributions that you can deduct if your deductions are itemized. Cash donations are typically limited to 60% of your adjusted income. However, the CARES Act removes that limit for 2020 returns.

Donating Cash vs. Donating Stuff

The amount of your possible deduction can be determined by writing a check, charging a donation or simply donating cash to charity. It’s just the amount that you contributed. You might also donate old furniture or clothing to charity. It is not always easy. Instead of being allowed to deduct the cost of the donated items, you can only determine the value of the items.

It is enough to get a reasonable estimate. This is usually based on the value of your items in a thrift store. It doesn’t matter if you give cash or goods; a receipt is required. A receipt is required if you give more than $250.

Did the Charity Give Any?

You can only deduct the amount of the gift you receive in return for your donation. This includes a meal, gift card or another tangible item. If you donate $150 to charity and receive a $50 meal, your tax deduction is $100.

Most charitable organizations will provide you with a summary showing the tax-deductible amount of your donation when you send them a thank you letter.

Timing your Donations

You can deduct the amount of your donation in the year you make it and the date the recipient receives it. While some donating methods are straightforward regarding when they are deductible, others, such as via text message or check, may not be so clear.

• Donations via check – The date you mail the check is when the donation was delivered.
• Contributions by text message: Deductible in a year you send the message.
• Credit card – Contributions to your bank credit card are deductible in the year you make them.