Almost everyone makes some charitable contribution during the year, whether to a religious or educational organization, or to one of the many social relief organizations whose activity has become critical for so many people over the past year. Beginning with tax year 2020, you can actually realize a modest tax benefit from your generosity if you are one of the 86% of taxpayers that do not itemize deductions on your tax return.
The CARES Act, passed in connection with COVID relief in April of 2020, added a new “above the line” deduction for taxpayers that are not generally able to realize a tax benefit from charitable donations because they claim the standard deduction. Beginning in 2020, taxpayers who do not itemize deductions can claim a deduction for up to $300* in CASH contributions to charity on line 10b of their Form 1040.
So, if you (i) made cash charitable contributions in 2020, and (ii) are not itemizing deductions (or don’t have enough itemized deductions to exceed the standard deduction** threshold) be sure to include the deduction for your gifts on your 1040. If you use a third-party tax preparer, be sure to advise them of your cash donations, even if you have not done so in prior years.
*For 2020, the deduction limit is $300 per return, whether filing single or jointly, although this is scheduled to change for tax year 2021 to $300 for single filers, and $600 for joint filers. Also, substantiation rules still apply, so be sure to keep a copy of your donation receipt, or the cancelled check or credit card statement with the donation(s) with your tax records.
** Generally $12,400 for a single filer, and $24,800 for a joint filer, in 2020).