Authorized by Congress in response to the pandemic, a special tax deduction in 2021 will reward taxpayers who make charitable donations by December 31.
This year only, taxpayers who take the standard deduction can claim an additional deduction of up to $300 for cash contributions to qualifying charities made in 2021. Married couples filing jointly can claim up to $600.
Last year, the Coronavirus Aid, Relief and Economic Security (CARES) Act gave taxpayers who took the standard deduction in the 2020 tax year the ability to take an above-the-line $300 federal income tax deduction for qualified charitable contributions. (“Above-the-line” means that the deduction can be subtracted from gross income to reduce both your adjusted gross income and your taxable income — which, in turn, reduces the amount of federal income tax you owe.)
For the 2021 tax year, the charitable deduction is even better, at least for those who file a joint return. For 2020, the charitable limit was $300 per “tax unit” — meaning that those who are married and filing jointly can only get a $300 deduction. For the 2021 tax year, however, those who are married and filing jointly can each take a $300 deduction, for a total of $600.
The contribution must be made to qualified charities per the Internal Revenue Service. Check online using this tool on IRS.gov. Not every qualifying organization is listed there. You can also look on many organizations’ websites for a determination letter from the IRS.
The $300 deduction ($600 for joint filing) must be for donations made in cash, which includes currency, checks, credit or debit cards, and electronic funds transfers. You cannot take the deduction for contributions of property, such as clothing or household items, nor for volunteering. You also cannot deduct cash donated to help a specific individual, such as a person’s medical expenses, even if the hospital itself is operated by a qualified charitable organization.
The $300 charitable deduction comes on top of the standard deduction with no itemization required. In the 2021 tax year, those filing single returns (or married filing separately) get a $12,550 standard deduction; those filing joint returns get $25,100. Those who are at least 65 years old or blind get an extra $1,350 (or $1,700 if using the single or head of household status).
If you itemize your tax return, you can’t take the $300 CARES Act deduction. Unless Congress acts to extend the deduction, the 2021 tax year is the last time you will see it.
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