'Tis the Season of Giving.
In March 2020, Congress passed the CARES Act to provide relief for Americans that were economically impacted by COVID-19. While many of this act's features, such as the Paycheck Protection Program and weekly unemployment payments, are pretty well known, we thought it would be constructive to look at one of the lesser-discussed features: changes to charitable tax deductions.
This may automatically sound boring, but trust us, it's not. With the biggest charitable season of the year upon us, let's examine how the CARES act has changed the rules.
To simplify things: this is a great time to be charitable if you can afford it. This holiday season is a stressful one for many essential workers, and plenty of people will be going into the holidays without being able to observe their usual holiday traditions. Donations made during this holiday season will make a much larger impact than they would during other years, and there are few better ways to show how thankful you are after this crazy year than passing some goodwill along to people who really need it.
Language in the CARES Act has also created more financial incentives for being charitable. Previously, charitable donations could only be deducted from taxes if they're properly itemized. This means that in 2019, you would need to inventory each individual charitable contribution made in order to receive tax benefits for those donations. However, taxpayers are now allowed to claim up to a $300 write-off for charitable donations during their taxes for 2020.
Simply put, this means that you're able to claim up to $300 in deductions for any cash donations that you make to an accredited charity this year. If you're anticipating paying more than that in taxes, there are few reasons not to pursue it. Making a donation in the last few weeks of the year is a great way to spread some holiday goodwill while also saving money on your taxes! Sounds like a win-win to us!
If you're curious about how the exact language on this provision works, the IRS has some helpful resources for maximizing the good that your donation can do. Beyond that, there are a few things worth keeping in mind.
First, your donation must be in the form of cash (debit card and check also work). Additionally, it needs to be made to a charity that's legally recognized by the IRS. Just about any organization with charitable infrastructure should meet this requirement, but it never hurts to ask if you're unsure. This deduction is only available for donations made in 2020, but it's possible that the window may be extended via future legislation. While you don't have to itemize your donation the same way that you would during other years, it's advised to hold on to some form of receipt for documentation in your taxes. A "thank you" email can work, as do other forms of acknowledgment from the charity that you donated to.
If you're in a comfortable spot to do so, then think about the good that a donation could do this holiday season. Your charity may make all the difference in a family having a safe and secure holiday season during an otherwise chaotic year.
What are some charities that you like to donate to? Let us know in the comments!