COVID-19 has impacted all of us in one way or another, and charities are no exception. Many of them are really struggling to continue providing their essential services. Giving to a charity before the end of the year will not only help them, but it can also provide you with a beneficial tax write-off.

For 2020, there is a new way to claim up to $300 from charitable deductions—even if you aren’t able to itemize. By not itemizing on Schedule A, you can take both the standard deduction and a deduction for up to $300 in cash contributions.

  • This write-off is per tax return, so couples filing jointly are limited to the $300 deduction.
  • This deduction cannot be used on charitable gifts by individuals to donor-advised funds and private nonoperating foundations.
  • Charitable contributions from prior years do not qualify for the deduction.
  • If you considering making a sizable gift to a charity, now would be the time to do it.
  • Only give to IRS-recognized 501(c)(3) charitable organizations.
  • Be alert for scammers claiming to solicit funds for COVID victims, as well as those who claim to be from charities with names similar to well-known organizations.
  • Donations to individuals are not tax-deductible.
  • Donations to fund-raising websites allocated for a single person or small group are not tax-deductible—unless the group is a 501(c)(3) organization.

As a reminder, noncash donations are also still deductible as itemized deductions. Storen offers an estimated valuation sheet taxpayers can use to determine what the value of their small donated items are worth. If the value of the noncash items is over $5,000, the IRS requires an appraisal to be attached to the return to substantiate the deduction. Make sure you have the appraisal done before or at the time of donation, not afterwards!

One final reminder is that if you are required to take required minimum distributions (“RMDs”) from your retirement accounts, you can have those amounts sent directly to your charity of choice and it satisfies the RMD requirement, but you won’t be taxed on the distribution by the federal or state governments. This could be significant for some people because the itemized charitable deduction only applies to the federal taxes and for people who can’t itemize their deductions, they would still benefit by utilizing this type of distribution which is called a qualified charitable distribution (“QCD”).

If you have any questions about this information or would like more specific details, please give us a call!

 

Blog by Doug Johnson – Senior Tax Professional

Learn more about Doug and the rest of the Storen Financial team here.