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New Rules For Charity Deductions


Taxpayers who are getting ready to file their 2021 tax returns should be sure to account for the many changes instituted by last year’s passage of the American Rescue Act. For instance, this year, taxpayers can now more easily qualify for charitable tax deductions, regardless of whether they use standard or itemized deductions. For help ensuring that you account for these changes when filing your own tax return, reach out to a dedicated Florida tax return preparation lawyer today.

Charity Deductions Permitted for Taxpayers Who Select Standard Deduction

There are two ways that a taxpayer can claim deductions on their tax returns: by using itemized deductions or by opting for the standard deduction. The standard deduction amount varies depending on a taxpayer’s income, age, and filing status. Unlike the standard deduction, which lowers a taxpayer’s income by a fixed amount, itemized deductions are made up of a list of expenses, which taxpayers can choose from to lower their tax bill.

In prior years, taxpayers who opted for the standard deduction were barred from claiming a deduction for certain charitable contributions. This meant that a lot of taxpayers didn’t qualify for charitable deductions, as it is estimated that nearly 90 percent of taxpayers now take the standard deduction. A temporary law change, however, means that married taxpayers who file jointly can now deduct up to $600 in cash donations to qualifying charities on their 2021 returns (individual taxpayers can claim up to $300).

Cash contributions include donations made by check, debit, or credit card, as well as amounts incurred for unreimbursed out-of-pocket expenses in connection with volunteer service. The value of volunteer service itself, securities, household items, and other property, however, don’t qualify as cash contributions for these purposes. It’s also important to note that there are a number of special record keeping rules with which taxpayers must comply when claiming this type of deduction. Eligible taxpayers must, for instance, usually obtain a letter from the charity acknowledging the donation before they can claim it on their return and should also keep any canceled checks and credit card receipts related to cash contributions.

Itemizers Who Made Charitable Contributions in 2021 May Qualify for 100 Percent Deduction

Taxpayers who itemize their deductions and who also made large cash contributions to charities in 2021 may also be eligible to deduct those donations, up to 100 percent of their adjusted gross income. This represents a significant change from prior years when the limit was 60 percent of a taxpayer’s adjusted gross income. There are, however, special rules that apply when choosing this higher limit, so if you have questions about how much you can deduct for a charitable donation, don’t hesitate to reach out to our legal team for help.

Call Today to Schedule a Free Consultation

For help with your own tax return, please reach out to dedicated tax return preparation lawyer, CPA, and former FBI Special Agent Ronald Cutler, P.A. You can set up a free consultation by calling a member of our legal team at 386-490-9949 or by sending us an online message.