Roughly nine out of every ten taxpayers take the standard deduction instead of itemizing.  In an effort to encourage people to give to charitable organizations, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 allows a charitable deduction up to $600 (married filing joint) or $300 (single) for all qualified cash donations made in 2021 regardless of whether or not the taxpayer itemizes.  This deduction lowers both adjusted gross income and taxable income.  The cash donations need to be made to qualifying tax-exempt organizations to be deductible.  Taxpayers are still required to keep receipts for any cash donations over $25.  If the taxpayer itemizes in 2021, the charitable donations will be reported on Schedule A and are not limited to $300/$600.

For those who do itemize, if elected, qualified charitable contributions are now limited to 100% of adjusted gross income in 2021.  Historically, charitable contributions have been limited to 20-60% of adjusted gross income depending on the type of contribution and organization.

Consult with your tax professional at Ketel Thorstenson about this or other tax matters because each situation is different. Don’t navigate the difficult and ever-changing tax codes and legislation on your own.  Ketel Thorstenson CPAs and tax professionals receive advanced training and continuing education all year long to keep our service on the forefront of the tax industry. Call us today for guidance on tax planning, tax return preparation, and tax legislation affects or questions.