Congress has been encouraged by the generosity of Americans during the COVID-19 crisis, and they want to encourage people to continue giving in the new year. The Taxpayer Certainty and Disaster Tax Relief Act has changed how charitable contributions will be handled during the 2020 and 2021 tax years. Here’s what you need to know.

Changes for 2020

The most recently passed COVID tax relief act added new benefits for those who make charitable contributions. For the 2020 year, taxpayers who do not itemize their deductions can deduct up to $300 for cash contributions whether you file as a married couple or individual. For taxpayers who itemize their deductions, they can increase the maximum deduction for cash contributions to 100% of their adjusted gross income.

Changes for 2021

On top of the change for 2020, there is also an expansion of this law for 2021. People who do not itemize their deductions will be allowed to deduct up to $300 for cash contributions made during 2021, or $600 for married couples. That deduction is also added onto the standard deduction for non-itemizers. We can help you determine if your taxes should be adjusted as a result when tax planning for this year.

How Can You Show Your Cash Contributions?

While the deduction is called a “cash” deduction, you can count contributions paid by credit card, electronic funds transfer, check, debit card or cash card. In order to be eligible to deduct the contribution, you must be able to show proof of the donation through:

  1. A bank record (statement or canceled check) that shows the organization name, date of the contribution and contribution amount
  2. A receipt or letter from the organization showing the name of the organization, contribution amount and contribution date
  3. Payroll deduction records that show your contribution(s) and a pledge card with the organization named

If you want to claim a deduction for a contribution of $250 or more, you must have a written acknowledgement from the organization showing the amount you contributed, whether or not you received goods or services in return and the date of the contribution. You must have proof of your donation in order to avoid paying a penalty, so keep in mind that dropping money in a donation bucket will not be eligible. Always ensure that you will receive a receipt when you are planning on making a cash contribution. This is particularly critical if you are going to be making a donation over $250.

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