With the holidays upon us, the season of giving commence with taxpayers making generous charitable donations. Optima Tax Relief reminds taxpayers that more Americans can easily deduct up to $600 on their tax returns for 2021.
Temporary Law Change
Usually, if you choose to take a standard deduction, you can’t claim a deduction for charity donations. Now, due to a temporary law change, you’re able to claim a limited deduction for qualifying organizations.
What is the deduction limit?
Even with the temporary law change, there are limits for how much you can claim for a deduction. Taxpayers that file individually – IRS specifies that this includes married individuals filing separately – can claim a deduction up to $300. For married individuals filing joint returns, the deduction limit is $600.
What qualifies as a cash contribution?
Donations made by check, credit or debit are all considered cash contributions. Unreimbursed out-of-pocket expenses for volunteer services also qualify. Volunteer services, securities, household items and other property do not qualify as a cash contribution.
It’s important to note that you must make your contributions to qualified organizations. Should your charity not qualify, you cannot claim a deduction. The IRS offers the Tax Exempt Organization Search tool to aide taxpayers in finding the status of a charity.
Most charitable organizations qualify, but donations made to supporting organizations (an organization that exists to support other charities), or toward donor-advised funds do not. A donor-advised fund is a fund where the donor can decide how the money is spent.
It’s important to keep records of your charitable contributions. Records would typically include obtaining an acknowledgment letter from the charity, canceled checks, or credit card receipts.