IRS allowing a special charitable tax deduction this year

Dear Friends of Friends Outside:
The IRS is allowing a special charitable tax deduction this year for people who do not plan to itemize their 2020 taxes next year. Every donation is important and will be put to good use, in support of children and families affected by the criminal justice system. Thank you for your consideration and we hope you all have a nice and healthy holiday season.

Here’s how to get this year’s special charitable tax deduction

By Jeanne Sahadi, CNN Business

Updated 9:27 AM ET, Sun December 20, 2020

The pandemic has put millions of Americans in dire financial straits, forcing many to rely on charities to adequately feed and clothe their families and stave off homelessness.

So this year the government has offered an added incentive for Americans to donate to charity. As part of the Coronavirus Aid, Relief and Economic Security (CARES) Act, lawmakers created a special one-time deduction to encourage other Americans with some cash to spare to make donations this year. The deduction, which expires on December 31, applies to tax filers who take the standard deduction on their federal tax return. The IRS estimates more than 87% of filers now take the standard deduction.

Normally, only itemizers may claim their charitable contributions, because the lump-sum standard deduction (currently $12,400 for single filers; and $24,800 for married filers) is intended to cover most deductions.  But this year, on top of taking your standard deduction, you also may take a deduction for cash contributions up to $300, so long as you donate that money by December 31. (Note: It does not apply to non-monetary contributions such as clothing or food.)

Although the IRS doesn’t require receipts to be filed with your return, be sure to keep a record of any money you give. “Make sure you document it. Keep your receipts for your cash donations in case you get asked about it later,” said Kathy Pickering, the chief tax officer for H&R Block.  If you’re making a one-time contribution of $250 or more to a single charity or non-profit, get a written acknowledgment of your donation from the organization, Pickering said. If you make donations below $250 to any single group, a canceled check or bank or credit card statement indicating proof of payment should suffice.  And if you’re making contributions through an employer-sponsored giving campaign in which your donation is deducted directly from your paycheck, then your paystub can serve as proof.  One other note: Those who are single or married and filing jointly may deduct up to $300 on their returns, but taxpayers who are married but filing separately may only deduct up to $150 each, Pickering said.

What you’ll be saving

Taking the deduction will of course reduce your tax burden.  For someone in the 12% tax bracket — which applies to single filers making up to roughly $40,000 and married couples making up to about $80,000, according to H&R Block — the deduction would reduce the tax bill by $36 (12% x $300.)  For someone in the 22% bracket, that amount jumps to $66.  But more than the money it saves, any tax-deductible contribution you make can go a long way toward helping charitable organizations — especially the smaller, local ones — continue to be a lifeline for so many in need this year.  Nearly three-quarters of Charity Navigator-rated nonprofits reported that they have suffered financially this year, while more than half have seen an increase in demand, and more than half said they had to cut back on programs.