You’ve probably heard a lot of buzz about the CARES Act this year. But did you know that the CARES (Coronavirus Aid, Relief and Economic Security) Act has made some important changes to tax law to encourage charitable giving?
This is wonderful news as non-profits like AppalReD Legal Aid are working harder than ever to reach folks struggling due to the economic impact of COVID-19. Just in the past few months, we’ve helped the elderly access health care and trafficking victims begin a new life. We’ve stood by the side of domestic violence victims. We’ve fought for clients with coronavirus to stay in their home while facing eviction and for unemployment benefits, which have resulted in secure housing.
To understand how the CARES ACT might benefit you when you give to a non-profit organization, first you must know if you will:
- Itemize all your deductions.
An example of itemized deductions are: mortgage interest, state and local taxes, property taxes, medical and dental expenses that exceed 7.5% of your gross income, and CHARITABLE DONATIONS.
Donors who itemize their deductions find themselves with an exciting opportunity to make a huge difference in their community and receive tax benefits.
The new tax law allows this group of donors to itemize their charitable contributions up to 100% of their adjusted gross income. This is an amazing opportunity to do good in a year where charitable organizations and the people they serve need every penny to navigate the challenges of this year. Just remember, it must be a “cash” donation!
2) Take the standard deduction
Most people take the standard deduction. According to Turbo-Tax, for approximately 75% of taxpayers taking the standardized deduction provides the biggest tax benefit. (Others may chose this deduction simply because they don’t have good records to itemize or don’t want to take the time.)
In the past, you could not claim any charitable deductions if you were in this group. However, this year because of the CARES ACT, individuals who take the standard deduction can deduct up to $300 dollars for charitable gifts to qualifying charities. Married couples may deduct $600.
This is an awesome opportunity to be financially savvy and generous. You can make a big impact in your community while providing tax benefits to you.
Since many taxpayers are not used to having the opportunity to deduct for charitable donations here are some important rules to keep in mind:
- You must donate to a QUALIFYING Charity. This is AppalReD Legal Aid!
This also includes most churches, synagogues, schools, and charitable organizations. If in doubt, search using the IRS tax-exempt organization search tool: https://apps.irs.gov/app/eos/
Remember, political contributions to an election campaign DO NOT count.
- You must donate cash. This means you can write a check or pay by credit or debit card.
- You must donate by 11:59 pm on 12/31. You can always make a last-minute donation on our website at https://appalred.kindful.com/.
- You need a record of your donation. AppalReD Legal Aid sends a letter by mail with a receipt of your donation. If you donate online, you immediately receive a receipt in your email. Other records include: your check or acknowledgement letters. Writing a check and having a copy of the cancelled check also counts as a record.
- Since you must donate cash, items you donate DON’T COUNT. An example of this might be, donating a used car, giving toys to a holiday drive, or boxes of clothes and household items to Goodwill.
- Items you buy from a charity DON’T COUNT. For example, buying a hat or t-shirt from a charity doesn’t count. Also, buying something from a non-profit event doesn’t count unless you subtract that amount of the goods. (For example, at an online gala you paid $150 dollars for a basket of fancy bath bombs worth $50 dollars. Then your donation would $100 dollars.)