Continuing the Charitable Theme

It’s Better to Give, Especially This Year

Ordinarily, charitable deductions are only available as an itemized deduction. When you file your federal taxes, you have an option to take itemized deductions or the standard deduction. The standard deduction in 2020 is $12,400 for an individual and $24,800 for a married couple filing jointly. In other words, even if you don’t have any itemized deductions, you can still claim the standard deduction. So, to itemize your deductions, you’d need more of the itemized deductions than the standard deduction to make it worthwhile to do so.

Let’s see how this works. Let’s say Mary is a single individual, and she has an income of $100,000. She has $5,000 of state and local taxes and makes $6,000 of donations to charity. She has no other itemized deductions. Her total itemized deductions would be $11,000. However, if she chose the standard deduction amount of $12,400, she’d be better off. Even if Mary increased her charitable donations by $1,400, she’d still be just as well off taking the standard deduction because only then would her total itemized deductions equal the standard deduction of $12,400.

However, for the tax year 2020, you can take an “above-the-line” deduction of up to $300 for donations of cash made to a public charity. That means that if you don’t itemize and take the standard deduction amount, you can still claim a deduction of up to $300 for donations to charity. The donations must be of cash and must be to public charities, like your church or your alma mater.

Let’s look again at Mary’s situation. She made $6,000 of donations to charity. If $300 of those donations were cash to a public charity, she could take those donations as an above-the-line deduction and still claim the standard deduction of $12,400 for 2020.

This particular rule came from the “CARES” act, which was Congress’ response to the pandemic to encourage more charitable giving. You can only take the above-the-line deduction if you don’t itemize. The maximum deduction is $300, whether you’re a single filer or a married couple filing jointly.

For more information about Steve Hartnett, author of this article, and to see others he has written, click here.

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