Whether you’ve already donated or are planning to donate to a nonprofit this year, you should know that charitable tax deductions have changed slightly for 2021. We know IRS language can be confusing, so we’ve put together a quick, simple guide to charitable deductions this year.
Where did these changes come from?
The Coronavirus Aid, Relief, and Economic Security (CARES) Act included these changes. The Taxpayer Certainty and Disaster Tax Relief Act of December 2020 extends them through the end of 2021.
What’s new in 2021?
Before, you couldn’t claim a deduction for charitable contributions if you chose to take the standard deduction. Now, you can take the standard deduction and also claim a limited deduction on your federal income tax returns for cash contributions to qualifying charitable organizations. You can claim a deduction of up to $300 in donations as an individual and up to $600 as a married couple filing joint returns.
Charitable cash contributions used to be limited to 60% of your adjusted gross income. Now, you can claim a deduction for any cash contribution up to 100% of your adjusted gross income.
What kinds of contributions qualify?
In general, your donations will qualify if:
- you donated by cash, check, credit, or debit card
- you incurred unreimbursed, out-of-pocket expenses in order to volunteer for a charitable organization
- you kept a record of your contribution
In general, they won’t qualify if:
- you donated household items or other property
- you donated to a donor-advised fund
- you donated in previous years but not in 2021
- you don’t have any record of your contribution
What counts as a qualified charitable organization?
- Nonprofit charities
- Nonprofit educational organizations and colleges
- Nonprofit hospitals and medical research organizations
- Nonprofit organizations for public parks and facilities
- Churches, mosques, temples, synagogues, etc.
- Volunteer fire companies
- War veterans organizations
- Civil defense organizations
Charitable organizations generally have to be U.S.-based to qualify. Mexican, Canadian, and Israeli organizations may count if you receive income from that country. For more specifics, visit https://www.irs.gov/forms-pubs/about-publication-526.
What’s new for businesses in 2021?
If you own a business, you can get more back for your donations this year. For C corporations, the deduction limit increased from 10% to 25% of their taxable income for charitable cash contributions. For businesses who make charitable food donations, the deduction limit increased from 15% to 25% of their taxable income.
What does this mean for you?
You can now make more back on your charitable donations, so if you have the means, donate! If you want to support underprivileged youth and their mental health, donations to You Care. We Care. are tax deductible and can go a long way in improving a child’s wellbeing.