You probably know that you can get an income tax deduction for a gift to a charity if you itemize your deductions. However, the Consolidated Appropriations Act, 2021 offers enhanced tax incentives for making charitable contributions for the 2021 tax year.
- Taxpayers who do not itemize deductions can deduct up to $300 in charitable contributions as an above-the-line deduction in calculating Adjusted Gross Income. (This limit is increased to $600 for married couples filing a joint return)
- If you itemize your deduction, the 60% of adjusted gross income has been suspended again for 2021. As a result, you can deduct any qualified cash contribution as long as the contribution does not exceed your contribution base (100% of your AGI)
Your donations, regardless of amount, must be substantiated. Generally, a bank record or written communication from the charity indicating its name, the date of the contribution and the amount of the contribution is adequate. However, there are stricter requirements for donations of $250 or more and for donations of cars, trucks, boats, and aircraft. If these records are not kept for each donation made, no deduction is allowed. Additionally, appraisals are required for large gifts of property other than cash. Finally, donations of clothing and household gifts must be in good used condition or better to be deductible.