Why Everyone Needs To Donate $300 To Charity Now

Hopefully, you got some fantastic deals on Black Friday or Cyber Monday and still have some money left over for Giving Tuesday 2020. This year millions are suffering financially under the challenges of the COVID-19 recession. The only bright spot is more people will be able to get a tax deduction for charitable deductions in 2020 as part of the pandemic relief program.

Under the Tax Cuts and Jobs Act (TCJA), aka the Trump Tax Plan, around 90% of Americans take the standard deduction when filing their federal income taxes. This translates into fewer taxpayers receiving a tax break when making charitable donations.  In 2020, as part of the pandemic relief program in the U.S., taxpayers can deduct up to $300 in charitable donations, even if they choose to take the standard deduction. One donation of $300 may not move the needle much but multiplied across millions of donations; the impact can be huge. 

Please, if you are able, consider donating at least $300 this year to a charity close to your heart. If you are doing well this year, consider making a more sizable donation. If the lines at food banks across the country are any indication, your generous donations are needed now as much as ever.

One nice benefit that has flown under the radar in the CARES Act, as part of the Federal Government’s pandemic relief program, is that individual taxpayers can take a tax deduction of up to $300 for cash donations made to qualified charities in 2020 when they file their 2020 tax returns in 2021. Normally, you would need to itemize your tax deduction to get any tax relief for donations to charity. As I mentioned earlier, it is expected that more than 90% of taxpayers will file their taxes in 2020 using the standard deduction, which means without the CARES Act exception, they would not be getting a tax deduction for donations to charity.

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For 2020, the standard deduction is $12,400 for single filers. Similarly, the standard deduction is $24,800 for married couples, filing jointly. Many nonprofits have seen a decline in donations due to the removal of this popular incentive. The new charitable deduction, via the CARES Act, does make it more advantageous for people to donate to charity in 2020. This deduction is taken above the line, which will help reduce your adjusted gross income (A.G.I.) by up to $300. Your A.G.I. reduction will be based on how much you donate. This is important because it can also determine your eligibility for other tax credits, deduction, and even eligibility to contribute to a retirement account like a Roth IRA.

What Type Of Donation Will Qualify for a Tax Deduction?

To benefit from this tax deduction, you must make a cash donation to a charity. Okay, I say cash, but I just mean monetary contribution. How you choose to make the donation (check, credit card, stock donation) is irrelevant. Cleaning out your garage or spare room and then donating those in-kind items that no longer spark joy at Goodwill or Out of the Closet will not qualify for this specific $300 tax deduction. However, these types of in-kind donations are still deductible for those who choose to itemize their tax deductions. Your donation must also be made to a qualified, 501(c)(3) public charity.  Gifts to private foundations or individuals are ineligible. The I.R.S. offers a search tool to help you verify which organizations are eligible to accept tax-deductible donations.  

Is the CARES Act Permanent?

Sadly, the $300 charitable deduction is limited to 2020. I would love to see President-elect Biden extend this donation. I am a huge fan of people doing good and donating, and I know tax incentives encourage more people to donate, and, perhaps, donate more.  For example, someone who can afford to donate $100,000 may be able to donate closer to $137,000, assuming the donor gets a tax deduction at the current, highest federal income tax bracket of 37% in 2020.

If my spouse and I file a joint tax return, can we deduct up to $600?

We are still waiting for clarification from the I.R.S. as to whether this law allows for a $300 tax deduction, per person, or per household. There has been some talk that it is not unreasonable to assume that the deduction is $600, per couple. However, this may not end up being the case. Talk with your tax professional about this when filing your taxes next year.

How should I decide where to donate?

There are many charities in desperate need of funds at this time. The reality is that they are always in need of more money, but these are exceptionally dire times for many Americans. Generally speaking, look for organizations with mission statements that align with something you care about, like performing arts, animal welfare, or equal rights. Or, in this time of expanding food insecurity, consider donating to your local food bank. I hope you never have to worry about where your next meal will come from, but life happens, and it could be your neighbor or loved one lining up to feed their family.

If you are concerned about how much of your donation will actually go to help those in need, websites like Charity Navigator  can help donors evaluate charities.

If you can, dig deep and give generously to reputable charitable organizations this h0liday season.