Every American has been impacted by the COVID-19 pandemic. For some, it means juggling the demands of work and childcare, while for others, it has caused job loss, financial uncertainty, health challenges, or the loss of a loved one.
Now more than ever, nonprofit organizations are filling the gaps caused by job loss and benefits interruption. Even small donations can provide enormous benefit to the friends and neighbors in your community that have been affected by the pandemic.
As you consider a donation to help those in need, you should be aware of the tax benefits associated with a charitable gift in 2020. The CARES Act, passed by the federal government in March, 2020, temporarily increased tax incentives to encourage donations from individuals and corporations. As of December 21, 2020, the deduction was extended through 2021.
If you are like most people and take the standard deduction, you can now claim $300 ($600 for a married couple) in annual charitable contributions. This is an “above the line” adjustment that will reduce your taxable income.
If you itemize your deductions, you can now deduct donations of up to 100 percent of your adjusted gross income (up from 60 percent), significantly reducing your taxable income.
Note that this new deduction is for gifts that are made to a public charity, such as United Way, and not to a Donor Advised Fund.
*This information is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in any examples are for illustrative purposes only. References to tax rates include federal taxes only and are subject to change. State law may further impact your individual results