Under normal circumstances, taxpayers who do not itemize their deductions cannot claim a charitable contribution on their tax return. But as we all know, 2020 has been anything but “normal circumstances” – and just as much of the world has turned topsy-turvy, the same rings true for taxes as well. For the calendar year 2020, the CARES Act allows individual taxpayers who do not itemize to claim a deduction up to $300 ($150 for married filing separately) for cash charitable contributions. Taxpayers who claim this deduction will see a small reduction in their adjusted gross income (AGI) for purposes of other calculations, such as some of the education tax benefits which depend on your AGI.
While you’ve probably spent your COVID lockdowns going through your closets and donating stuff to charity, those donations do not qualify for this deduction. To qualify, the donation must be in cash and made to an organization such as a church, nonprofit educational institution, nonprofit medical institution, or other public charity. To use this non-itemized charitable contribution, the taxpayer must use the standard deduction and cannot claim any other itemized deductions on Schedule A. Noncash contributions, such as clothing or household goods donations, do not qualify for this special deduction for people who do not itemize.
However, the good news is that this charitable contribution deduction for non-itemizers has been extended through 2021, with some changes. The IRS will double the amount of the deduction for taxpayers who file as married filing jointly to $600 ($300 for all other filing statuses) on 2021 returns. Another change made for the 2021 deduction is that it will no longer reduce your adjusted gross income for other calculations (such as certain education tax benefits). The 2021 deduction will reduce taxable income but not adjusted gross income.
Another thing to keep in mind for both deductions is that the contributions must be made during the tax year. They cannot be carryovers of contributions you made in a prior year. So, for 2020’s return, the contributions must be made in 2020, and for 2021’s return, the contributions must be made during 2021. An excess of contributions for 2020 does not carry over to 2021. Congress wants to encourage taxpayers to make new contributions, so only contributions made during that year can be claimed.
And like everything else: make sure to keep your donation receipts! While the amounts may seem small, it is possible the IRS will want to see documentation that you made the contribution – so keep your acknowledgment letters!