Special Tax Considerations for 2021 Charitable Contributions
With recent events and the holidays coming up, you may be thinking about ways you can give back. Donating not only helps those around you, but it can also provide you with some tax benefits. If you donate to a 501(c)3 organization, then you can claim your donation as a deduction on your tax return. According to the IRS Tax Exempt Organization tool, there are currently 654 eligible charities and non-profits to donate to in Bellingham, so there are many organizations you can choose to support.
The ability and the amount you can deduct depends on if you take the standard or itemized deduction when filing your taxes.
Standard Deduction
Typically taxpayers who take the standard deduction aren't able to deduct charitable contributions, however, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 enacted temporary tax changes. For the tax year 2021, taxpayers who don't itemize can deduct up to $300 of cash donations to qualifying organizations. If you are married filing jointly, you can deduct up to $600.
Cash contributions include those made by check, credit card, and debit card. If you volunteer for a qualifying charitable organization, you can also deduct unreimbursed out-of-pocket expenses related to volunteering such as gas, parking, and supplies. However, you cannot deduct the value of volunteering or item donations such as food, toys, and clothing.
Itemized Deduction
Taxpayers who itemize typically have a charitable deduction limit of up to 20% to 60% of their adjusted gross income (AGI) depending on the type of contribution and the charitable organization. However, in 2021, taxpayers may be able to deduct up to 100% of their AGI for qualified contributions. The 100% limit is not automatic so eligible taxpayers will need to elect to take the new limit on their 2021 federal tax return.
Keep your receipts!
If you donate to a charity, make sure you have a receipt that shows the organization, date, and amount of your donation. There are steep penalties if the IRS audits you and you cannot provide substantial records to back up your deductions.
Need help filing your taxes? Our tax preparers here at Northside Tax Service are happy to help! Give us a call at (360) 922-0235 to schedule an appointment.
Disclaimer: This material is prepared for informational purposes only, and is not tax advice. Please speak with a tax professional or visit the additional resources below to see how this information may apply to you.
