Even if you don’t itemize your taxes, you can still deduct for some charitable donations
You can get a tax break for this year’s contributions to nonprofits and charities even if you don’t itemize your taxes next year.
That’s because a year ago, Congress and President Donald Trump agreed to allow taxpayers to deduct up to $300 for cash contributions to qualifying organizations in 2021. Married couples filing jointly can deduct $600.
While it’s impossible to say exactly how that will help California’s nonprofits, which includes thousands of such organizations throughout the state, there’s great potential, particularly if the break is extended and expanded in the future, said Lucy Salcido Carter, the policy director at CalNonprofits.
Nonprofits employ about 1.2 million people in the state, and provide about one-third of all Medi-Cal services.
“So you can see the impact California nonprofits have on our economy, workforce, and services supply chain,” she said.
It’s tough to quantify precisely what the deduction will mean. About 90% of taxpayers do not itemize on their federal return, but generally less than half of American households make tax-deductible contributions.
“The potential gain for nonprofits in our state is significant if every Californian who files a non-itemized return takes advantage of this universal charitable deduction opportunity,” Carter said. “But there are other policy variables at play.”
The deduction was created for the 2020 tax year as a way of helping nonprofits during the COVID pandemic. This year couples filing jointly can deduct up to $600 instead of $300.
The deduction has been a big help to smaller, local nonprofits, said Rick Cohen, chief operating officer of the National Council of Nonprofits.
“These aren’t the million dollar gifts. These are the $50 here, $100 there. For the nonprofits that receive these smaller gifts, it makes a huge difference,” he said, particularly for more local agencies.
The 2017 tax law has discouraged itemized deductions, since it allowed a huge increase in the standard deduction and curbed some popular breaks. Among them is an inability to deduct state and local tax payments above $10,000.
That law also “made major changes that discourage charitable giving relative to under prior tax law,” said the nonpartisan Tax Policy Center.
Questions and Answers
Some questions and answers from the Internal Revenue Service about the charitable deduction:
Q. How do I deduct the amounts?
A. Line 12B on your 2021 Form 1040.
Q. What is a “cash contribution?”
A. It’s any donation made by cash, check, credit card or debit card. It can also include expenses someone incurred as they volunteered for a qualifying charitable organization.
Q. How do I know if my donation went to a qualifying organization?
A. Check the IRS’ Tax Exempt Organization Search site.
Q. What might not qualify?
A. Contributions made “either to supporting organizations or to establish or maintain a donor advised fund,” says the IRS. Also not okay: Donations from previous years or those made to most private foundations or most cash contributions to charitable remainder trusts.
Q. Elaborate, please.
A. Here’s how the IRS describes it: “In general, a donor-advised fund is a fund or account maintained by a charity in which a donor can, because of their donor status, advise the fund on how to distribute or invest amounts contributed by the donor and held in the fund.
Also: “A supporting organization is a charity that carries out its exempt purposes by supporting other exempt organizations, usually other public charities.”
Q. Is there a deadline to make these contributions?
A. December 31, 2021.
This story was originally published December 28, 2021 at 5:25 AM.
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