Charitable Contribution Deductions

November 9, 2021

Tax News You Can Use: Reminder - Charitable contribution deductions up to $600 for cash donations by non-itemizers

Individuals donating cash to charity will have expanded tax benefits through the end of 2021. Taxpayers who do not itemize deductions on their tax returns will be able to deduct up to $300 in charitable deductions or up to $600 for those filing married filing jointly. Individuals who itemize may elect to deduct qualifying charitable contributions up to 100% of their Adjusted Gross Income (AGI).

Special rule for cash donations by non-itemizing Individuals
As a result of higher standard deductions as part of the 2017 Tax Cuts and Jobs Act, almost 9 out of 10 taxpayers currently take the standard deduction when filing their individual tax returns. Typically, those who choose to take the standard deduction instead of itemizing are unable to claim a deduction for their charitable contributions. However, with the Taxpayer Certainty and Disaster Tax Relief Act of 2020, non-itemizing individuals can claim a charitable deduction for cash donations of up to $300 for those filing single, head of household, qualifying widow(er), or married filing separately. Non-itemizers filing married filing jointly may deduct cash donations up to $600 in charitable contributions.

Higher AGI limits in 2021 for charitable contributions by individuals who claim itemized deductions
Individuals who itemize may typically claim a deduction for charitable contributions ranging from 20% to 60% of their adjusted gross income (AGI) depending on the type of contribution and type of charitable organization. Generally, an individual’s cash contribution to a qualifying charitable organization is limited to 60% of their AGI, with any excess contributions being carried forward for up to five tax years. For 2021, individuals may instead elect to deduct up to 100% of their AGI with qualifying contributions. An eligible individual must make this election on their 2021 Form 1040 or Form 1040-SR; otherwise, the usual percentage limit will apply.

Cash Contributions Qualifying for the Special Deduction
Cash contributions to most charitable organizations are considered qualified charitable contributions. Cash contributions that do not qualify include those made to supporting organizations, those made to establish or maintain a donor fund, contributions carried forward from prior years, those made to private foundations, and most contributions made to a charitable remainder trust.

Specific examples of qualified charitable contributions include cash or property donated to:

  • Churches, synagogues, temples, mosques, or other religious organizations
  • Federal, state, or local governments when the contribution is used for public purposes (such as maintaining a public park)
  • Nonprofit schools and hospitals
  • Various organizations such as The Salvation Army, American Red Cross, CARE, Goodwill Industries, Boys and Girls Clubs of America, etc.
  • War Veterans’ groups
  • Out-of-pocket expenses when serving as a volunteer to a qualified organization

Important: Have Good Record Keeping
The Internal Revenue Service reminds those claiming charitable deductions that special recordkeeping rules apply. Generally, this means obtaining an acknowledgement letter from the charity as well as keeping a cancelled check or credit card receipt for cash contributions. When donating property, additional recordkeeping rules apply such as filing Form 8283 when claiming a deduction over $500 as well as obtaining a qualified appraisal when claiming a deduction over $5,000.

For a comprehensive list of qualified charitable deductions and recordkeeping rules, please see Publication 526 on IRS.gov. If you have questions regarding this article please contact your Herbein + Company, Inc. tax consultant or email us at info@herbein.com.

Article prepared by Paige Famous. For additional information contact us at info@herbein.com