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When filing your taxes, remember the new charitable contributions tax break, which allows you to deduct $300 from your taxable income, even if you already use the standard deduction. It’s easy to miss, especially for W-2 employees who file taxes automatically, as it’s a new, above-the-line deduction.
What is the charitable contributions deduction?
In response to the COVID pandemic, the CARES Act introduced a $300 charitable deduction for both individual and joint filers during the 2020 tax season (reported on line 10b of Form 1040). This tax break was extended for 2021, allowing married couples filing jointly to deduct $300 each, totaling $600.
The important thing to note here is that this is an above-the-line deduction. Typically, tax breaks for charitable contributions require itemizing your deductions, but 87% of filers opt for the standard deduction and miss out on these breaks. This is because the standard deduction is usually the better option for reducing overall taxable income, and more convenient than itemizing (it’s $12,400 for single filers and $24,800 for married couples filing jointly). However, in this case, you can still get some tax relief for charitable donations, even with the standard deduction.
Some restrictions apply.
This deduction is only for cash donations (currency, checks, credit or debit cards, electronic transfers). You cannot claim deductions for items like clothing donated to Goodwill or food given to a pantry, nor for your time or volunteer work. Additionally, you can’t deduct donations involving an exchange of goods from which you might benefit personally, such as buying items from a charity bake sale or purchasing a raffle ticket.
Finally, ensure that the charity is IRS-approved. Before claiming any donation, use the IRS look-up tool to confirm if the charity qualifies for tax-deductible contributions.
