If you want to save a little money on your next tax bill while doing some good in 2020, time is running out.
Earlier this year, a new federal law — the Coronavirus Aid, Relief, and Economic Security (CARES) Act — temporarily suspended rules that say you cannot deduct charitable donations on your tax return unless you itemized deductions.
For this year only, taxpayers who do not itemize can take a charitable deduction of up to $300 for monetary donations to qualifying organizations.
In other words, it’s an “above-the-line” deduction. Or, as the IRS explains it:
“This means the deduction lowers both adjusted gross income and taxable income — translating into tax savings for those making donations to qualifying tax-exempt organizations.”
For the purpose of a federal tax write-off, qualifying charities are defined as those that the IRS classifies as tax-exempt. You can find out whether the IRS considers a particular charity tax-exempt by using the federal agency’s free online tool called the Tax Exempt Organization Search. The IRS recently released a tip on how to use the tool.
For 2020, the CARES Act also temporarily suspends limits on charitable donations for individuals who itemize their deductions. In other tax years, that limit is generally 60% of their adjusted gross income, or AGI (found on your tax return), meaning the amount of charitable donations they can deduct generally cannot exceed 60% of their AGI.
To be eligible for these one-time exceptions to the rules for charitable write-offs, the IRS reminds you that you must make your charitable donations by Dec. 31.
The change on charitable deductions is just one way that the coronavirus has impacted the tax code. For more, check out “5 Ways the Coronavirus Will Change Your Next Tax Return.”
Tax season is right around the corner. If you are struggling with old obligations and would like to clear them before tax time arrives, stop by Money Talks News’ Solutions Center and look for some expert help with settling your tax debt.
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