Lifting Your Community, Reducing Your Tax
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As I previously discussed, we must understand the difference between itemizing and utilizing the standard deduction. A lot of folks wonder, “If I don’t itemize, are there any benefits in giving to charity?”
Traditionally, we would say, “There’s no benefit, other than knowing you helped out a worthy cause that is close to you.” That may help us feel better but would not have reduced our tax bill at all.
However, 2020 is a strange year, and charitable giving is no exception. Due to the pandemic, Congress is allowing a $300 “above the line” deduction for charitable giving. Since this is an above the line deduction, you can utilize this deduction even if you do not itemize, which is a great benefit.
Now, of course, it will not be life-changing money but let’s say you are in the 24% federal tax bracket; that $300 deduction will reduce your tax bill by $72. No biggie, I know, but hey, it is something, and during the holidays, every dollar can be helpful. Unfortunately, this $300 deduction is the same whether you are married filing jointly or single.
So, even if you do not itemize, consider helping one of your favorite local charities out. I am sure they will appreciate the support. $300 to the organization just may help them keep providing community assistance during the pandemic. Plus, the government is essentially subsidizing your contribution by reducing your taxes a bit also. We can thank the CARES Act for this deduction, by the way.
Oh, and remember to keep that receipt because the documentation requirement for charitable contributions appears to apply to the above the line deduction also. We suggest utilizing a credit card, writing a check, or using an electronic payment method for easier tracking as well as keeping the receipt. Another thing to remember, this $300 above the line charitable deduction does not apply to donations of non-cash items to Goodwill, The Salvation Army, and other organizations that take tangible items.
More Thoughts about Charitable Giving
You can read about other options for lifting your community while lowering your tax burden in the article series below:
If you have questions about above the line donations or other charitable contributions, feel free to reach out to me at email@example.com or click here.