WASHINGTON – The Internal Revenue Service today joined with several prominent nonprofit groups to highlight a special tax provision that allows more people to deduct donations to qualifying charities on their return federal revenues of 2021.
The independent sector and the National Council of Nonprofits have joined with the IRS in highlighting this pandemic-related provision that married couples jointly reporting can deduct up to $ 600 in cash donations and Individual taxpayers can deduct up to $ 300 from donations.
Under the temporary law, taxpayers do not need to itemize deductions on their tax returns to take advantage of them, creating tax-advantaged donation options that are not normally available to around 90 percent of tax filers. Normally, people who choose to benefit from the standard deduction cannot claim a deduction for their charitable contributions. But this special provision allows them to claim a limited deduction on their 2021 federal tax returns for cash contributions made to qualifying charities by year-end, December 31, 2021.
At a time when many charities are struggling during the pandemic, the IRS is highlighting the new provision and urging people to make sure to donate to a qualifying charity. The special Tax-Exempt Organizations Finder tool on IRS.gov can help people make sure they’re donating to a qualified charity.
“The pandemic has created unique challenges for tax-exempt organizations, and we want to make sure people don’t overlook this special tax deduction available this year,” said Sunita Lough, IRS Commissioner of the Tax Division. Exempt and Government Entities. “Donations to qualifying charities can lower people’s tax bills when they deposit in 2022.”
Leaders of the National Council of Nonprofits and the Independent Sector, two prominent organizations representing charitable groups across the country, stressed that the special tax provision can provide additional help to organizations hard hit by the pandemic. Some groups have seen their charitable giving decline and others have seen the demand for their services increase during this unprecedented period.
“At a time when nonprofits continue to experience immense demand for services, they face significant challenges in recruiting and retaining staff to provide these services – every donation counts,” said David L. Thompson, Vice President of Public Policy at the National Council of Nonprofit Organizations. “We are grateful that the universal (or non-itemized) deduction is available until the end of the year to encourage every taxpayer to give a little more to the missions they care about.”
“Over the past two years, charities have helped America cope with the health, economic and social crises of generations. They have answered the call to serve their communities despite lost revenues, disrupted operations and dramatically increased needs, ”said Daniel J. Cardinali, President and CEO of Independent Sector. “Congress has sent a powerful message that everyone – not just those who itemize their taxes – has a role to play in helping achieve this moment, and we know Americans will respond the same. We hope that charitable contributions and deductions will increase in the years to come. “
Included in the CARES (Coronavirus Aid, Relief, and Economic Security) law, promulgated in March 2020, a more limited version of this temporary tax benefit originally only applied to the 2020 tax year. Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted last December, generally extended it until the end of 2021.
Almost nine in ten taxpayers now benefit from the standard deduction and could potentially be eligible. Under this provision, individuals filing for the 2021 tax year, including married individuals filing separate returns, can claim a deduction of up to $ 300 for cash contributions made to qualifying charities. in 2021. The maximum deduction is increased to $ 600 for married individuals filing joint returns.
Cash contributions include those made by check, credit card, or debit card, as well as amounts incurred by an individual for unreimbursed expenses related to their volunteer services to an eligible charity. Cash contributions do not include the value of volunteer services, securities, household items or other property.
The IRS reminds taxpayers that to qualify for a deduction, they must donate to a qualified charity. To check the status of a charity, they can use the IRS’s Tax Exempt Organizations Finder.
Cash contributions to most charities are eligible for a deduction. But contributions made either to supporting organizations or to establish or maintain a donor-advised fund do not. Contributions carried over from previous years are not eligible, nor are contributions to most private foundations and most cash contributions to charitable residual trusts.
In general, a donor advised fund is a fund or account maintained by a charitable organization in which a donor can, by virtue of their status as a donor, advise the fund on how to distribute or invest the monies donated. by the donor and held in the fund. A supporting organization is a charity that achieves its exempt purposes by supporting other exempt organizations, typically other public charities.
The IRS encourages all donors to beware of scams disguised as charitable solicitations. Criminals create bogus charities to profit from the generosity of the public. Fake charities were once again on the IRS’s tax scams list for 2021. In October, the IRS also joined with international organizations and other regulators to highlight the fight against the charitable fraud.
Special record keeping rules apply to any taxpayer claiming a charitable donation deduction. Usually this includes obtaining a receipt from the charity before completing a return and keeping a void check or credit card receipt for cash contributions.
For more details on the record keeping rules to justify charitable donations, see publication 526, Charitable Contributions, available at IRS.gov.