- You may be able to claim up to $US300 in cash contributions to charity as a deduction on your tax return.
- The donations had to be made by December 31, 2020, to an IRS-approved organisation.
- This is the only charitable deduction available to taxpayers who don’t itemize their deductions.
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Last spring, Congress authorised $US2 trillion in economic relief, including stimulus checks, expanded unemployment benefits, and loans for small businesses. And in December, it approved another massive rescue package.
These lifelines have helped millions of Americans get by as the coronavirus spread throughout the US.
But tucked into the first aid package â€” the CARES Act â€” was a smaller provision incentivising Americans in a position to help others in need: a new above-the-line charitable deduction.
Beginning with 2020 tax returns, taxpayers can claim up to $US300 in cash contributions made by check, debit card, or credit card to a tax-exempt organisation this year as a deduction from their gross income if they take the standard deduction. This deduction will ultimately reduce the amount of income that’s taxable.
Tip: The IRS list of approved organisations includes those that are “religious, charitable, educational, scientific or literary in purpose.” Use this tool to search for a specific organisation.
If you use a service like TurboTax or H&R Block to prepare your tax return, they will ask if you donated to charity in 2020. Have handy your electronic or paper receipts, or have bank records, showing the date and amount of your contributions.
Over 130 million US taxpayers could qualify for the new charitable tax break
Usually taxpayers who want to claim charitable deductions need to itemize. Ever since the standard deduction amounts were increased under the 2017 Tax Cuts and Jobs Act, fewer people have been able to itemize deductions.
The IRS estimated in November that nearly nine in 10 taxpayers took the standard deduction instead of itemizing in 2018. That means the new provision potentially qualifies some 134 million taxpayers to claim the charitable tax deduction, the IRS reported.
The coronavirus pandemic has impacted nearly every sector of American life, from healthcare to the restaurant industry. The deadline to claim charitable donations for 2020 was December 31. But if you’re still looking to donate, Charity Navigator has a list of the highly rated charities responding to the crisis (use this IRS tool to double-check that the charity is tax-deduction eligible).
Tanza Loudenback, CFP
, is the personal-finance correspondent at Business Insider. She writes most frequently about saving money, planning for retirement, taxes, debt management, and strategies for building wealth.
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