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Special Tax Benefits for Charitable Donations Extended Through 2021

The CARES Act of 2020 included provisions to make it easier for taxpayers to donate to charities. Congress and the IRS have extended these temporary rules through tax year 2021. One key rule raises the deduction limit for charitable contributions, while another allows taxpayers to deduct certain donations even if they don’t itemize deductions on their tax returns.

Standard IRS rules limit the deduction that taxpayers who itemize deductions can claim for charitable donations to at most 60% of adjusted gross income (AGI). However, under the extended special rules, these taxpayers may elect to claim a deduction of up to 100% of their AGI for qualified monetary donations made during calendar year 2021.

Taxpayers who claim the standard deduction ordinarily cannot deduct any charitable donations on their tax returns. However, the special rules allow these taxpayers to claim a deduction of up to $300 (up to $600 for joint filers) for qualified monetary contributions made to charities in 2021. You may claim this deduction in addition to the standard deduction for your filing status.

Only monetary contributions qualify for these special tax benefits. Monetary contributions include donations to qualifying charities made by cash, check, digital payment or credit card, as well as by paying unreimbursed expenses while doing volunteer work. Donations of goods, property (including virtual currency) or labor do not qualify for these temporary deduction rules.

The extended special rules are set to expire at the end of 2021. A tax professional can help you plan your charitable giving for the rest of the year to take advantage of the available tax benefits. The IRS search tool for nonprofit organizations (link below) can help you find eligible charities that accept qualifying monetary contributions.

IRS Nonprofit Search: