IRS Expands Benefits for Charitable Contributions
Donations can help you lower your tax due and at the same time help give back to the community. To be deducible on your tax return, contributions must be to 501(c)(3) non-profits; they cannot be political organizations, social clubs, and usually cannot be made to a foreign country organization. Additionally, the IRS has recently expanded the limits on these deductions.
Most people think the only way to donate is via cash online or in person, however, there are many options.
Other ways to contribute are:
- You could contribute through your job; most of the time, your company will also match your amount. Your donation will typically show up on your W-2; if it does not, you can always let your tax preparer know.
- If you receive an IRA distribution and are over seventy and half years old, you can make a qualified charitable distribution (QDC). You would inform your financial planner, and they would make the transfer directly to a qualifying charitable organization. During the tax year, do not forget to let your tax preparer know how much of the IRA distribution is QDC.
- You could open a Donor Advised Fund (DAF) through a financial company and make a one-time donation. Based on your instructions, the financial company oversees distributing the money to the organizations of your choice throughout the year, which will eliminate you having to make donations all year to multiple sites. Let your tax preparer know how much you contribute to the DAF.
- Lastly, you could make in-kind contributions. In-kind contributions consist of different items like clothing, household items, a car, or stocks.
Normally, if you take a standard deduction, you are not allowed to deduct any charitable donations. However, for the tax year 2020, the Internal Revenue Service allowed up to $300 of qualified charitable contributions. The IRS has allowed the same for the tax year 2021; a single filer can deduct up to $300, and married filing jointly can deduct up to $600. For people who do itemize, the IRS has expanded the limits. For more information, click the link below.