Donate by December 31 to Score a Charity Tax Deduction
Getting a charity tax deduction is always great. But 2021 has some tax provisions that can give you extra savings – as long as you donate by December 31.
Direct Charity Tax Deduction
In the past, only taxpayers who itemize could deduct their charitable donations. But until the end of this year, anyone can take a direct deduction for donations up to $300. Charities are only required to give receipts for donations over $250. So, if you don’t give your entire $300 donation to one organization, be sure to keep good records.
By the way, this special deduction is only for cash donations. If you’re donating household goods or personal items, you’ll need to itemize.
Another Expiring Charity Tax Deduction
If you want to give a large – really large – amount to a qualified charity, you’re in luck. Normally you’re able to take a charity tax deduction up to 60 percent of your adjusted gross income. But this year you can take a deduction of 100 percent of your AGI. The economic fallout from the pandemic has hit charities especially hard. So, the feds are doing their best to encourage you to be generous.
What Is a Qualified Charity?
In order to get a charity tax deduction, you must give to a qualified charity. What kind of organizations qualify? Specifically, groups the IRS recognizes as tax-exempt in the pursuit of philanthropic, nonprofit, or civic activities. Those include (but aren’t limited to):
- Charities like Goodwill, United Way, Salvation Army, Red Cross, CARE, Boy/Girl Scouts, and Boys & Girls Clubs of America
- Nonprofit schools, hospitals, and volunteer fire departments
- Churches and other religious organizations
- Veterans’ groups
- Cultural and arts organizations
- Public parks and recreation facilities
A GoFundMe donation – for example, a campaign aimed at paying someone’s medical bills – does not qualify. Likewise, political donations don’t earn a charity tax deduction either. If you volunteer for a charity, your time is not deductible. But if you drive as part of your volunteer work, you can take a deduction of 14 cents a mile.
Other Types of Donations
Certain types of donations are more complicated. For example, donating real estate, stocks, or a direct distribution from a retirement account. All have rules that are a little complicated to navigate. If you’re planning a major donation like this, give us a call, and we’ll help you plan.
The IRS’s Tax-Exempt Organization Search tool can help you find out if your donation will qualify for a deduction. You can also look at your selected non-profit organization’s tax return to see how they spend your money.
Charity Navigator evaluates charities and their use of funds, and can help you find an organization whose goals you support.
Lastly, you can learn more about our services here!