Don’t Throw Out Those Charity Receipts Just Yet

By Chesky Landa, CPA

Over the past few years, since the Tax Cuts and Jobs Act was passed, many taxpayers have fallen out of the habit of maintaining their charity receipts. It’s simply not beneficial to those who don’t itemize. Actually, this is not necessarily a bad thing. Not itemizing saves time and aggravation, and with the Jobs Act’s new and larger standard deduction, taxpayers simply reduce their taxable income by a standard amount without having to track and record the details of their spending on mortgages, health care, and donations.

If, however, you miss piling up those charity receipts, you’re in luck. This year, thanks to Congress’s response to the pandemic, you can take the standard deduction AND also subtract up to $300 from your taxable income. For more details on this “above-the-line” deduction, see page 29 of https://www.irs.gov/pub/irs-dft/i1040gi–dft.pdf, or talk to your friendly neighborhood CPA.

(Please note that we are talking here about a reduction in the amount of income counted when your tax due amount is figured. If you do not have any tax due, then this deduction is not relevant to you.)

IF YOU GAVE A LARGE AMOUNT THIS YEAR

For those who DO itemize, the usual limit on cash donations has been removed. In other years, you can deduct the value of charitable giving, but only up to 60% of your adjusted gross income. This year, due to the CARES Act, you can deduct the value of the donations up to 100% of your AGI. (Transfers to private foundations and donor advised funds are excluded, however.)

So if you were in a position that allowed you to donate the entirety of your 2020 income to worthy causes, you may be able to take the full amount as a deduction this year. (The money must have been transferred during the 2020 calendar year, and there are other restrictions.)

Likewise, corporations are also getting incentives for greater giving. Typically, a C Corporation can deduct up to 10% of its taxable income — this year it’s upped to 25%. Consult with a tax advisor or accountant, however, since this deduction cannot be stacked with other charitable deductions, and there are some restrictions on the types of recipients.

–Chesky Landa, CPA, is a tax accountant and preparer with many years of experience and expertise helping individuals and businesses understand their tax scenarios. This article is meant for general information and does not constitute specific tax or legal advice. Contact him at 347-613-4259, Chesky@landaaccounting.com.