Are you in the mood for the holidays? Consider making a charitable donation, and you’ll end up giving the best type of gift – one that benefits you as well as the recipient.
The Internal Revenue Service (IRS) currently has a unique tax regulation in effect that allows Americans to deduct certain charitable contributions from their 2021 taxes, cutting their tax burden and resulting in financial benefits.
Single filers can claim a deduction of up to $300, while married couples who file jointly can claim a deduction of up to $600. Importantly, you do not even have to itemize your deductions in order to qualify.
You will, however, need to move quickly. By December 31, you must have made a tax-deductible donation to be eligible for a tax deduction.
Typically, roughly 90 percent of households that claim the standard deduction are not eligible to deduct charitable contributions from their taxable income when filing their income taxes.
However, in response to the COVID-19 outbreak, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was passed by Congress in March 2020, relaxed those prohibitions.
The Taxpayer Certainty and Disaster Tax Relief Act, which was passed in December 2020 and subsequently extended through 2021, had a provision to protect taxpayers in disaster situations.
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According to Sunita Lough of the Internal Revenue Service, “the epidemic has presented unique issues for tax-exempt organizations, and we want to make sure that people don’t neglect the specific tax deduction that is available this year,” according to a recent news release.
“Donations to qualified charities can help taxpayers decrease their tax liability when they file their taxes in 2022.”
Donations must be made in cash or in the form of a check, credit card, or debit card in order to be eligible.
Expenses expended by an individual for unreimbursed out-of-pocket expenses incurred in conjunction with their volunteer services to a qualifying charitable organization are also eligible, according to the Internal Revenue Service.
Donors must be tax-exempt charity organizations; supporting groups, donor-advised funds, and private foundations are not permitted to receive funds. By verifying the IRS database, you can ensure that the charity of your choosing is eligible and is not a fraud operation.
One final word of caution: if you take advantage of this one-time-only deduction, make sure to maintain documentation.
Keep all of your receipts and any letters of acknowledgment you receive in case the Internal Revenue Service requests you to provide documentation to support your claims.
