For those who plan on donating to a charitable organization for Giving Tuesday, there could be some opportunities to receive money back when filing taxes next year.
Here are some notable tax changes on giving through the end of 2021, according to the IRS.
Individuals who don’t itemize can receive a deduction.
Taxpayers who typically take the standard deduction haven’t been able to deduct charitable contributions, but now, they can claim a limited deduction when donating to certain qualifying charitable organizations.
A deduction is up to $300 for married individuals who file separate returns and up to $600 for married individuals who file joint returns.
The limit on eligible cash contributions made by taxpayers who itemize deductions is 100%.
Those who itemize deductions for charitable contributions to qualifying organizations have in the past received a deduction of 20% to 60% of their gross adjusted income.
Now, those taxpayers can apply to receive up to 100% of their adjusted gross income for charitable donations to qualified organizations.
The 100% limit isn’t automatic.
Taxpayers must choose to take the new limit for any qualified cash contribution, otherwise, the usual limit applies. Other allowed charitable contribution deductions reduce the maximum amount allowed under this election. Individuals must make their elections on their 2021 Form 1040 or Form 1040-SR.
The corporate limit now is 25% of taxable income.
C Corporations that make contributions to eligible charities can apply for an increased limit of 25% of taxable income. The increase is not automatic.
C Corporations must choose the limit on a contribution-by-contribution basis.
Businesses that donate food can have increased deductions.
Businesses donating food inventory may qualify for an increased deduction limit of 25% if they are eligible for the existing enhanced deduction.
For C Corporations, the 25% limit is based on taxable income.
For other businesses, such as sole proprietorships, partnerships and S corporations, the limit is based on their total net income for the year. A specific method for computing the enhanced deduction will continue, as will food quality standard and other requirements.