The New Charitable Deduction for Standard Deduction Taxpayers
Historically, the charitable donation tax deduction was only available as a below-the-line itemized deduction, and standard deduction takers weren't able to deduct their charitable donations. But if you made charitable contributions in 2020 and plan on taking the standard deduction on your 2020 tax return, read on – you may be eligible for a small above-the-line deduction.
Section 2204 of the CARES Act provides a small benefit to charitably inclined taxpayers who take the standard deduction. Starting in 2020, taxpayers who take the standard deduction are allowed to deduct up to $300 of cash donations made to qualifying 501(c)(3) charitable organizations. This provision only applies to cash donations (including contributions made by check, credit card, and debit card) and not to donations of non-cash property like clothing, household items, and appreciated stock.
In tax year 2020, the limit is $300 if filing single, head of household, qualifying widower, and married filing jointly. The limit is $150 if married filing separately. The limits in 2021 for married filing jointly and married filing separately have been updated to $600 and $300 respectively.
Contributions to Donor Advised Funds (DAFs), supporting organizations, non-operating private foundations, and use of a carryforward deduction are not eligible for this deduction. Since 2020 was an election year, I’ll note that contributions to political organizations, campaigns, and candidates are not deductible either.
If you’ve never taken a charitable deduction on your tax return before, remember to keep track of your contribution records. Without proper recordkeeping, you cannot deduct any cash donations. If you are audited and cannot produce the required records, your deduction will be eliminated and penalties may apply.
Per IRS Publication 526, you must keep a bank record, or a receipt / letter / other written communication (such as email) from the organization with the name of the organization, contribution date, and contribution amount. If your contribution was made through a payroll deduction, you must keep a paystub, W-2, or other document from your employer showing the date and amount of the contribution, and a pledge card or other document from the organization showing the organization’s name and that states the organization doesn’t provide goods or services in return for any contribution made to it by payroll deduction.
If you made any individual cash contribution of $250 or more, the organization must provide a contemporaneous written acknowledgment of your contribution (see IRS Publication 526 to see what qualifies as a contemporaneous written acknowledgment).
- 2020 taxpayers taking the standard deduction may deduct up to $300 ($150 if married filing separately) of qualifying charitable cash donations, as long as proper recordkeeping requirements are adhered to.
- Cash donations include those made by check, credit, or debit cards, and do not include non-cash donations such as clothing and appreciated stock.
- Contributions to DAFs, supporting organizations, and non-operating private foundations are ineligible, as is the use of a carryover from prior years.