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Doug Pitassi

President of Pacific Office Automation

Contributions to charity in 2021: tax advantages

The IRS allows taxpayers to write off some organizations' total amount of monetary donations. A debit card, credit card, or cheque is acceptable for these contributions. However, they can only be deducted if given to an approved charity. To help taxpayers take advantage of the new deduction in 2021, the CARES Act temporarily lifts the bar on charitable cash deductions.

The need to itemize deductions has diminished as the standard deduction has risen in recent years. The good news is that despite the economic climate, many individuals still give to good causes. More than two-thirds of all donations are given by people, even though the standard deduction was just doubled. Furthermore, donating has grown among individual taxpayers during the past six years. Nonetheless, many taxpayers' motivation to donate to charity has been diminished by the doubling of the standard deduction in 2018.

In addition to encouraging charitable contributions, the CARES Act has piqued the curiosity of high-net-worth taxpayers. The law specifically included a clause meant to inspire philanthropy in the face of the COVID-19 outbreak. For years 2020 and 2021, the CARES Act will raise the deductible for monetary contributions to public charities from the 60% of AGI allowed under the Tax Cuts and Jobs Act to 100%. Therefore, even the highest-earning individuals can deduct as much as 100% of their taxable income.

Under the new law, each individual can deduct up to $300 in charitable contributions. The maximum annual deduction for a married couple filing jointly is $600. The money saved on taxes is a significant perk. Knowing your tax liability in 2021 is essential if you want to donate to a charity that year. Before making a tax-deductible donation, you should investigate the contribution caps and other rules in effect in your state.

Since the standard deduction for married couples has increased to $24,000 from $12,000 the previous, giving cash to charity can result in more significant tax savings. Smaller gifts, however, might be challenging to break down. Contribution itemization can help you save money and is an option worth considering. For example, donations of up to $300 in cash to qualified charities will be tax deductible for 2021. But a married couple can deduct $600 in monetary donations if they choose not to itemize their tax return.

Keep records of your charitable contributions if you want to take advantage of the tax break afforded to those who donate to charity. You can use a letter from the organization, a canceled check, or a credit card receipt as proof of payment. In addition, keep track of the date, the total money, and the organization you gave to. The IRS's Tax Exempt Organization tool may determine whether groups are eligible for the deduction. This resource will provide you with a complete directory of all qualified organizations.

Donations of nearly everything, not just money, are deductible. The current market value of the donated property is also deductible. Use a professional appraiser if the property's value exceeds $5,000, and provide a summary of their findings with your Form. An outside valuation may be enough for sums below a certain threshold. Use this approach to calculate the actual value of your gift so that you may claim a tax deduction.

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