Whether taxpayers are supporting natural disaster recovery, COVID-19 pandemic aid or another cause that’s personally meaningful to them, their charitable donations may be tax deductible. These deductions basically reduce the amount of their taxable income.
Here’s how the CARES Act changes deducting charitable contributions made in 2020:
Previously, charitable contributions could only be deducted if taxpayers itemized their deductions.
However, taxpayers who don’t itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. For the purposes of this deduction, qualifying organizations are those that are religious, charitable, educational, scientific or literary in purpose. The law changed in this area due to the Coronavirus Aid, Relief, and Economic Security Act.
The CARES Act also suspends limits on charitable contributions and temporarily increases limits on contributions of food inventory. More information about these changes is available on IRS.gov.
Here are some resources for people making donations:
Tax Exempt Organization Search
Taxpayers must give to qualified organizations to deduct their donations on their tax return. They can use this tool to find out if a specific charity qualifies as a charitable organization for income tax purposes.
Publication 526, Charitable Contributions
This publication explains how taxpayers claim a deduction for charitable contributions. It goes over:
Publication 561, Determining the Value of Donated Property
Taxpayers generally can deduct the fair market value of property they donate. This publication helps determine the value of donated property.
Form 8283, Noncash Charitable Contributions
Taxpayers must file Form 8283 to report noncash charitable contributions if the amount of this deduction is more than $500. The instructions for this form walk taxpayers through how to complete it.
Schedule A, Itemized Deductions
Taxpayers deducting donations do so on Schedule A. The instructions for this form include line-by-line directions for completing it.
Frequently asked questions: Qualified charitable distributions
Taxpayers age 70 ½ or older can make a qualified charitable distribution from their IRA – up to $100,000 – directly to an eligible charity. It’s generally a nontaxable distribution made by the IRA trustee to a charitable organization. A QCD counts toward their minimum distribution requirement for the year.
Tax Topic 506, Charitable Contributions
Deducting Charitable Contributions at a Glance
"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area.
Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at firstname.lastname@example.org.
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.
Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720
To better serve our clients and friends, to keep you up-to-date and informed, our blog is a resource for tax tips and overall accounting related articles. We hope you find this useful!