IRS Highlights 2021 Charitable Tax Benefit

Several leading nonprofit organizations, along with the IRS, have joined together to highlight a special tax provision that allows more people to deduct donations to qualifying charities on their 2021 income tax return. This pandemic-related provision allows married couples filing jointly to deduct up to $600 in cash donations and individual taxpayers can deduct up to $300 in donations.

Under the temporary law, taxpayers do not need to itemize deductions on their tax returns to take advantage of the tax provision. Normally, people who choose to take the standard deduction cannot claim charitable contributions, but this special provision permits them to claim a limited deduction on their 2021 federal income tax returns for cash contributions made to qualifying charitable organizations by December 31, 2021. Nearly nine in ten taxpayers take the standard deduction and therefore would not typically qualify for charitable donation deductions. Moreover, cash contributions include those made by check, credit card or debit card as well as amounts incurred by an individual for unreimbursed out-of-pocket expenses in connection with volunteer activities to a qualifying charitable organization. However, cash contributions do not include the value of volunteer services, securities, household items or other property.

Further, the IRS encouraged all donors to be wary of scams masked as charitable solicitations. To this end, taxpayers are encouraged to use the special Tax Exempt Organization Search tool on the IRS website to make sure the charities you choose to support are legit. Criminals create fake charities to take advantage of the public’s generosity, and in October, the IRS joined international organizations and other regulators in highlighting the fight against charity fraud.