What You Need to Know About Making Charitable Gifts from the US Kelly Phillips Erb - Bloomberg Tax
go to original November 13, 2021

GIVE BACK, GET BACK (Cheapism)

Last year, charitable donations in the U.S. totaled $471 billion, a 5.1% increase from the previous year. This, despite - or maybe because of - the pandemic and associated preventative measures had forced many folks out of work. More than two-thirds of giving - or $324 billion - came from individuals.

Individual taxpayers have reached into their pockets more often lately, with gifts increasing in five of the last six years. It’s a surprising - and encouraging - trend, considering that the tax incentive for charitable giving had been reduced for some taxpayers with the doubling of the standard deduction as of 2018.

If you’re considering making a year-end gift, here are some tips to make your donation tax-favored.

Claim an Above-the-Line Deduction

To claim a charitable deduction on your tax return, you must typically itemize your deductions on Schedule A of Form 1040. However, if you - along with 90% of taxpayers - don’t itemize your deductions, you still have the chance to make an above-the-line deduction. An above-the-line deduction is often referred to as an adjustment to income since it reduces your adjusted gross income and taxable income. You’ll find it on the front page of Form 1040.

A temporary change in the law means that single filers and married taxpayers filing separately can deduct up to $300 for cash contributions made to qualifying charities during 2021. The potential deduction ticks up to $600 for married taxpayers filing joint returns.

A similar opportunity was available to taxpayers in 2020, but there was an overall limit of $300 for most taxpayers - and $150 for those married taxpayers filing separately.

For purposes of the deduction, cash donations are those made by check, credit card, or debit card. Cash deductions don’t include securities, household items, or other property. And while cash contributions to most charitable organizations qualify, those made to supporting organizations and donor-advised funds do not.

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