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Giving Tuesday: What you need to do to take advantage of the tax benefit

Dec. 1 marks the eighth annual GivingTuesday, a global movement meant to encourage people to donate to charitable causes or volunteer. What some Americans may not realize is that a charitable donation now could mean more money in your wallet come the 2021 tax season.

If this is your first time donating, you may want to start here: under the 2020 CARES Act SEC. 2204, Americans can donate up to $300 of qualified charitable contributions during the taxable year without having to itemize; this is considered an “above the line” deduction. Patrick Rush, CEO of Triad Financial Advisors and author of “Gain Big and Give Back,” said this type of donation is a “no brainer” for anybody charitably inclined, especially younger generations.

“Right now $300 is nice, especially those that don't own homes and are not itemizing their taxes, this is going to be a great way for them to start giving,” Rush said. He encourages those who haven't donated already to start here, in order to “get the effects of it from a tax perspective.”

If you want to donate more than $300 to charity, the 2020 CARES Act temporarily removed the limit for cash donations this year. Caroline Bruckner, American University tax professor, calls this a “big change.”

“Charitable deduction used to be limited,” Bruckner told Yahoo Finance. “You could only donate and write off up to 60% of your adjusted gross income, but for 2020, you can write off up to 100% of your adjusted gross income.”

Donations of more than $300 must be included in your itemized deductions on IRS Schedule A, attached to Form 1040 come tax filing season if this charitable contribution in addition to your deductible expenses exceed the standard deduction based on your filing status. Before you hit the donate button, make sure the charity you’re donating to is considered “deductible as a charitable contribution” under the IRS – and always get a receipt.

And note that contributing to a GoFundMe campaign isn’t the same thing in the IRS’s eyes. “That's not the same thing as making a contribution to a qualified charitable organization that has been through the IRS process to have 501(c)(3) status,” said Bruckner.

According to the IRS’s 2019 Publication 526, which was used in preparing 2019 returns, the following charitable contributions can be deducted; money or property you give to:

  • Churches, synagogues, temples, mosques, and other religious organizations

  • Federal, state, and local governments, if your contribution is solely for public purposes (for example, a gift to reduce the public debt or maintain a public park)

  • Nonprofit schools and hospitals

  • The Salvation Army, American Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts of America, Girl Scouts of the USA, Boys and Girls Clubs of America, etc.

  • War veterans' groups

BLOOMINGTON, INDIANA, UNITED STATES - 2020/11/21: A Turkey sits ready to be distributed as members of the Indiana National Guard assist Pantry 279 food bank to distribute Thanksgiving meals at Hoosier Hills food bank. (Photo by Jeremy Hogan/SOPA Images/LightRocket via Getty Images)
A turkey sits ready to be distributed as members of the Indiana National Guard assist Pantry 279 food bank to distribute Thanksgiving meals at Hoosier Hills food bank. (Photo by Jeremy Hogan/SOPA Images/LightRocket via Getty Images)

2020 is ‘too unusual to predict’ what year-end giving may look like

According to 2019 GivingTuesday data, at least $511 million was donated online and $1.46 billion was donated offline in the U.S. on Dec. 3, 2019. GivingTuesday’s Chief Data Officer Woodrow Rosenbaum told Yahoo Finance recent trends “are encouraging” and “indicators are very positive right now.” However, he said, 2020 is “too unusual to predict” what total year-end giving may look like.

Both Rush and Bruckner advise to check-in with your company to see if it can match your donation and remember, a financial donation can be close to home too.

“People are thinking about the needs in their communities and how they can support them. Generosity is an important antidote to fear, isolation, and division and giving is a way for people to have agency over these concern, to help heal and build the communities and world they want to live in,” Rosenbaum said.

Brooke DiPalma is a producer for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma.


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