Last year, being 2020, Congress passed many laws related to the coronavirus and COVID-19. One of them included a deduction from charitable contributions for everyone who doesn’t itemize their tax deductions on Form 1040. The amount was limited to $300 per return, so a taxpayer filing as a single individual got the same deduction as a married couple filing jointly.
THE CHARITABLE DEDUCTION RULE FOR 2021
The Consolidated Appropriations Act of 2021 (H.R. 133, P.L. 116-260 (12/27/20)) is the law that Congress passed on December 21, 2020 and the president signed on December 27, 2020. This law extends and modifies the $300 charitable deduction for people who don’t itemize their deductions for 2021. The modification increases the maximum amount that may be deducted for married couple to $600 for married couples filing jointly. This means, it’s effectively $300 per taxpayer instead of the rule for 2020 that was $300 per tax return.
With the year end coming on fast, we’ll all start receiving donation requests from charities. For 2021, if you don’t itemized your deductions, you’ll still be able to get a tax deduction for the first $300 for single people and $600 for married couples filing jointly for your cash contributions to charities.
Donations that qualify:
- The donation has to be in cash. Of course, checks or credit card payments are treated as cash for this purpose.
- The amounts incurred by an individual for unreimbursed out-of-pocket expenses in connection with the individual’s volunteer services to a qualifying charitable organization.
Donations that do not qualify:
- Cash contributions to supporting organizations do not qualify
- Cash contributions to establish a donor advised fund do not qualify
- Cash contributions to most private foundations do not qualify
- Cash contributions to most charitable remainder trusts do not qualify
Record keeping requirements for tax deductions
The IRS has special record keeping requirements for tax deductions of charitable contributions. This includes obtaining an acknowledgement letter from the charity before filing the return and keeping a cancelled check or credit card receipt for contributions of cash.
More information is available from the IRS
This page on the IRS website explains the new rules under the December 2020 tax legislation. The IRS also has a publication with much more details for charitable contributions. See Publication526, Charitable Contributions for these details.