Take Advantage of Expanded Tax Deductions for Charitable Donations in 2021
It’s the season of giving, and you’ve decided to put your money to good use by donating to a good cause. The best part? Your charitable donation could be tax-deductible!
Thanks to the extension and expansion of 2020’s Coronavirus Aid, Relief, and Economic Security Act (CARES Act), even more taxpayers are eligible to take advantage of the deduction this year.
What is the charitable contribution tax deduction?
Before the pandemic, this tax break was typically only available for those who itemized their tax deductions. The CARES Act changed that in 2020, allowing those who took the standard deduction to write off their charitable contributions as well.
What qualifies as a charitable contribution deduction?
Cash donations made in 2021 to most public charitable organizations qualify for this deduction, although the IRS does note a few exceptions. If you are planning to do some charitable giving this year and would like to receive a deduction on your income tax, just make sure you’re giving to a qualified organization or nonprofit.
What is the charitable donation tax deduction limit for 2021?
Even if you claimed the charitable deduction last year, don’t expect things to look exactly the same for 2021. Congress has not only expanded the CARES Act but temporarily enhanced some of its benefits for this year – including an increase to the maximum deduction amount.
Like last year, individual filers can still claim a maximum tax deduction of $300 for cash contributions made to public charities. The biggest change comes for married couples filing jointly, who can now deduct up to $600 on their 2021 tax return. This is a nice perk for joint filers wanting to give back to charity for the holidays!
How will these changes affect my taxes?
This enhanced tax write-off is no longer just for itemizers. Those who elect to take the standard deduction can also qualify for the charitable contribution tax deduction. In short, your 2021 charitable contributions can reduce your taxable income regardless of whether you choose the itemize or not.
The bottom line
While most individuals won’t see a big change from last year, the deduction of charitable contributions is still a good deal compared to pre-pandemic restrictions. If you’re considering making a cash donation to charitable organizations the holidays, don’t forget to claim the deduction on your tax return and give yourself the gift of a tax break. In 2021, it pays to be generous!
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