IRS Highlights Deductions for Cash Donations by Non-Itemizers

The IRS highlighted how expanded tax benefits help both individuals and businesses give to charity before the end of this year. The law now permits these taxpayers to claim a limited deduction on their 2021 federal income tax returns for cash contributions made to certain qualifying charitable organizations. These taxpayers, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions made to qualifying charities during 2021. The maximum deduction is increased to $600 for married taxpayers filing joint returns. Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify to claim a limited deduction for cash contributions.

Cash contributions made either to supporting organizations or to establish or maintain a donor advised fund do not qualify. Also, cash contributions carried forward from prior years do not qualify, nor do cash contributions to most private foundations and most cash contributions to charitable remainder trusts.

Subject to certain limits, taxpayers who itemize could generally claim a deduction for charitable contributions made to qualifying charitable organizations. These range from 20 percent to 60 percent of adjusted gross income (AGI) and vary by the type of contribution and type of charitable organization. The law now permits electing individuals to apply an increased limit (Increased Individual Limit), up to 100 percent of their AGI, for qualified contributions made during 2021. More information can be found at https://www.irs.gov/forms-pubs/about-publication-526.