D is for Deducting Your Donations and How the CARES Act can Help

D is for Deducting Your Donations and How the CARES Act can Help

Donating your time, money, or goods is a valuable way to give back to your community. Some donations are tax-deductible and can reduce your taxable income. But charities are not all created equal. Some charities are tax-deductible, and some aren’t. Knowing the difference is key for you and your wallet when it comes time to do your taxes.

Deducting your donations correctly is important. If your contributions do not meet the deduction standards, you won’t get the proper deductions come tax time. Of course, getting money back should not be why you are helping charitable organizations. However, it may make you feel helpful and make your tax consequences a bit more manageable.  

To help combat the impacts of COVID-19, the CARES Act (Cornonavirus Aid, Relief and Economic Security Act) was signed into law. It extends the charitable tax incentives and provides some additional provisions. The adjusted gross income (AGI) limit for cash contributions for qualified public charities remains increased for 2021. You can elect to deduct up to 100 percent of your AGI (formerly 60 percent before the CARES Act). 

The CARES Act also allows for an added “above-the-line” deduction for charitable gifts made in cash up to $300 for taxpayers filing single/separately. And NEW for 2021, a $600 “above-the-line” deduction for those married filing jointly. 

How to Deduct Your Donations Correctly:

Donate to the correct organizations. Not every organization is tax-deductible, even if it is a nonprofit. Check here to see if your favorite charity qualifies as a 501 (c)(3). And don’t forget to ask how much of your donation will be tax-deductible.

Keep track of your contributions. If you expect to get your deductions, you must prove your gift. Therefore, you must keep any receipts or bank statements with the amount and date of the gift. Always include the name of the organization as well. As long as you have proof of your gift, property donations are included as well. This can include furniture, clothing, books, etc.

Don’t miss out on other deductions. In some cases, when you volunteer, you give much more than your time. Expenses you have solely for your volunteer organization are exempt. Keep your receipts for gas and mileage, office supplies, and anything else. If you are audited, your receipts are extremely helpful.

Donating to charity can help those in need and your wallet if you properly deduct it. Talk to your CPA or other tax professional today to see if your charitable giving counts as tax-deductible!


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