The stimulus bill (sec. 2204) adds a $300 above-the-line tax deduction on charitable contributions for those who do not itemize their deductions.
Since the tax overhaul in 2018, there aren’t many people who consistently itemize their tax deductions since the Standard Deduction increased greatly making it more advantageous for most people. For 2020, the standard deduction is $12,400/single or $24,800/couple.
The huge stimulus bill – the bill which gives most U.S. Residents $1,200 – also contains an added tax deduction of up to $300 on money donated to eligible charities for people who do not itemize their deductions. (Those who do itemize already get all their charity deducted on their taxes.) There’s no mention in the bill of those couples who file jointly getting $600. Some presume that joint-filers will get a $600 deduction. (Update: seems this is not the case – the deduction is limited to $300 even for those filing jointly.)
Interestingly, this change is relevant for 2020 and beyond, it’s not tied to 2020 or to the pandemic. Donations since January 1, 2020 will qualify, and the deduction will apparently continue into 2021 and beyond. This is no longer thought to be true.
Let’s say you are in the 24% federal tax bracket and you give $300 in charitable contributions to 501(c)(3) tax-exempt organizations. You’ll then be able to deduct that $300 off your taxable income, and you save $72 on your taxes. That’s on top of your standard deduction. The goal apparently is to increase charitable contributions. Regardless, if you anyway give charity, be sure to do it in a traceable way (e.g. check or credit card) and then claim the deduction on your tax return. Donations $250 or more need a receipt from the charity as well.
A few other details:
- The bill limits this $300 deduction to donations made directly to a charity, not to a donor-advised fund.
- The bill also mentions that it’s limited to cash donations, which seems to exclude things like clothing donations.
- Not clear if a donation of stock would classify as a ‘cash donation’.
Related:
- Stimulus: Government To Send Out $1,200 Checks/Deposits To Most US Residents; Expanded Unemployment & More
- US Stimulus: Should You File Your 2019 Tax Return Now?
- Stimulus Bill Forbids Credit Agencies From Issuing Negative Marks For Certain Deferred Payments
- Stimulus Bill: Making Sense Of The Options For Small Businesses & Employers (Grants + Loans)
- Stimulus Bill: Explaining the Unemployment Benefit for Employees, Self-Employed & Gig Workers
- Stimulus Checks: People Who Don’t File Taxes Can Register Their Bank Info With IRS-TurboTax Online Portal To Get Their $1,200
- Stimulus: EIDL Grant For Small Businesses Will Be $1,000 Per Employee, Per SBA Clarification
- IRS Now Lets You Check Your Stimulus Payment Status
- A Few Updates On Those $1,200 Stimulus Checks
- A Few Updates On The Small Business Grant & Loan Programs (PPP, EIDL Funding Round 2)
- IRS Website Finally Allows You To Add Bank Information For $1,200 Stimulus Direct Deposit
- Lawmakers Overhaul PPP Loan Forgiveness Program For Small Businesses
- EIDL Loan & Grant Program Reopens For New Applications
What caught my attention:
“Some presume that joint-filers will get a $600 deduction.”
I didn’t presume the IRA contribution for 2019 would be extended to July 15th, either, and then…
Stay tuned.
If you are married and filing jointly, your deduction is still limited to $300. “Enter the total amount of your contributions on line 10b. Don’t enter more than $300. $300 is the most you can enter on your return even if your filing status is married filing jointly.”
Chuck https://thefinancebuff.com/cares-act-charity-donation-deduction-married.html
Chances are that you, and someone you know, are eligible. Over 87% of tax filers (more than 134 million taxpayers) do not itemize their deductions. Consider gifting tax deductions this holiday season. If you have a niece or nephew working first job out of college with a passion for the environment or love of animals, then give a donation and make it in their name. If you have a grandchild serving to protect our country, then pick their favorite veterans charity. Include instructions for them to enter the amount on line 10b of Form 1040. I imagine the tax bill for most young adults won’t drop by more than $36, but might encourage them to donate more themselves, even if their donation is time volunteering. Just don’t gift deductions to The Human Fund. Happy Festivus!
Updated, thanks
It figures that right when I decide to set up a donor advised fund to save on taxes, they shoot a hole through my justification! Not a big one, though, I still think the DAF will net me close to $5000 tax savings over three years. I guess the $300 extra deduction isn’t a bad thing. But I still don’t quite understand the concept of giving money to charity only if you get a tax break.
Once again “stimulus” larded up for the special interests by corrupt politicians
Yeah. Damn those non-profits helping people, providing and protecting knowledge — so much garbage! 😉
I’m guessing Kiva would fall under a donor advised fund?
If it is towards a loan it is not tax deductible but if you are donating to the organization itself they claim on their website to be a 501(c)3 U.S. nonprofit.
A Donor Advised Fund is something you set up, for example though Fidelity Charitable or Vanguard Charitable, in order to direct donations to charities of your choice. The benefits of using a DAF is for example taking a deduction in high income years and then giving in lower income years, or lumping many years of giving into a single year’s deduction.
Anyway, Kiva is not a DAF, the earlier answer is entirely correct.
Interesting, thanks for the explanation.
Not that you asked, but the internet says that you can write off defaulted loans as capital losses (to balance out capital gains and an additional 3k)
You might be surprised what memberships you may already have that qualify as charitible. For example, buying an annual pass to my non-profit Zoo or Children’s Museum both claim that the cost of the membership qualifies as a charitible deduction, as they claim that the fair market value of the benefit received is “negligible”.
I haven’t tested this personally in an audit though 🙂 But at least the organizations themselves claim to back me up.
Interesting, never heard of that before.
Maybe you’ve been living in a cage.
Both the San Diego Zoo and Contemporary Jewish Museum told me how much of my membership was deductible.. I’ve gotten similar notifications from multiple organizations in the past.
Is that comment necessary? Chuck is only trying to help people and saying that he has been living in a cage is extremely disrespectful.
Yep. My $200 Family membership to Shedd Aquarium was fully deductible last year.
Before the 2017 tax changes we always itemized and wrote off zoo/aquarium/museum memberships. If you are overly cautious of an audit be careful of some science museums, such as the Maryland Science Center because the membership comes with a magazine subscription and that part of the money is not tax deductible according to the museum. These memberships are such a great deal anyway since many have reciprocal privileges at other museums and zoos (the aquariums not so much in my area).
I like that this was added but wish it was larger. The TCJA was net favorable for us but it completely took away any tax benefit of donating as we are not in a position to donate enough to get over the standard deduction and I think this was true for many people who had previously been able to deduct their contributions given the number of itemizers dropped significantly.
Charities were struggling to entice donations even before the lockdown so this will help a little but could have been more. Hopefully everyone here can at least do $300 if they hadn’t already planned to do so. Plenty of charities accept credit cards if you are working on minimum spend requirements 🙂
I wonder about donations made via credit/debit card through Facebook birthday fundraisers. For example, it is X’s friend’s birthday on April and he prefers people to donate to his chosen (legal) charity, say St. Jude’s. That should be eligible right? All proceeds go directly to the charity as far as I have read.
It might not be eligible (even with 100% proceeds to chosen charity) if the conversion from credit/debit card to check/EFT is processed by DAF. https://www.facebook.com/help/1872359709660621 “Donations are paid out to your nonprofit depending on where and how your organization is enrolled. Nonprofits in certain locations can enroll to receive money from Facebook Payments. Donation money may also be distributed through donor-advised funds like Network for Good or PayPal Giving Fund.”
The donation from the donor-advised fund to the charity won’t be deductible, but the donation TO the donor-advised fund will, because DAFs themselves are established in order to support charity.
“The bill limits this $300 deduction to donations made directly to a charity, not to a donor-advised fund.”
This was a ridiculous move in 2017 and undoubtedly hurt charitable giving in 2018 and 2019. Good to see this was rectified — especially when so many charities will face financial hurdles in the upcoming recession.
$300/person isn’t going to do a whole lot, unfortunately. But I get where you’re coming from, I donate 2x in alternate years.
“Limited to cash donations” – I assume that this means donating old clothing to the Salvation Army, for example, doesn’t count. Agree?
Added a note, thanks
In other news, charities are now swamped with people offloading $300 worth of unusable garbage.
Cash donations only, allegedly, so you can’t take your useless crap to Goodwill and reduce your tax liability. Which is a good thing.
Why is donating to goodwill a bad thing?
It’s not an evil act. But it does not necessarily do anything good. The vast majority of Goodwill donations end up in landfills anyway–especially clothing. https://www.washingtonpost.com/lifestyle/home/whats-in-your-landfill-lots-of-textiles/2020/01/27/7d43830c-364c-11ea-bb7b-265f4554af6d_story.html