IRS Allows A Special Donation Deduction In 2020

Charitable donations, beside from helping the society and causes that are important to you, have a tax benefit for those who itemize their deductions. In general, individuals are allowed to either take a Standard Deduction or Itemized Deduction, whichever that is higher. Before enacting the Tax Cuts and Jobs Act (TCJA) more people were taking itemized deduction since the standard deduction was lower (about 32% of all returns took itemized deduction in 2016). But after the TCJA, since standard deduction increased substantially ($12,400 for single taxpayers and $24,800 for married filing jointly in 2019) less people took itemized deduction (rough 11%). Not being able to take itemized deductions, it discouraged some people to donate to charitable organizations. The Coronavirus Aid Relief and Economic Security (CARES) Act, however, introduced a special above the line deduction for charitable donations made in 2020. This above the line deduction is limited to $300 and is designed for people who are taking the Standard Deduction, who otherwise would not be able to deduct any of their charitable donations. This cash donations can be made in cash, checks, credit and debit card, and must be made to qualified charitable organizations. The above the line deduction reduces your Adjusted Gross Income and as well as you Taxable Income.

Since today December 1, 2020, is the Giving Tuesday, and many big tech companies match your donations, it would be great to take advantage of the IRS special deduction, big tech matching, and helping cause endear to you in this difficult time.

If you have any questions about deductibility of your charitable donations, please contact us at Info@qtaxservices.com or at (424) 888-3878.

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