‘Tis the season for decking the halls, gathering with friends, watching holiday movies, and other popular traditions. It is also time to share the warmth of the season by donating to a charitable organization. Doing so not only helps support a worthwhile cause but can also allow you to claim a tax deduction of up to $300 for individuals or $600 for married couples who have a Houston CPA firm file their tax returns jointly.
According to the Internal Revenue Service (IRS), a special tax provision will allow non-itemizing taxpayers to claim a deduction of up to $300 for year-end cash donations made to qualifying charities during 2021, up to $600 for married couples filing jointly.
The IRS adds that cash contributions to qualifying charities may be made using your preferred payment method. That includes using cash, debit card, or credit card. Taxpayers must make a cash donation using one of these methods before December 31, 2021. Other types of contributions are ineligible when taking the standard deduction.
Individuals making a $300 cash donation to a qualifying tax-exempt organization may potentially lower their adjusted gross income (AGI) and taxable income. Ideally, you should consult a Houston CPA firm about your situation and to gain a better understanding of this deduction.
Here are some things to consider when making year-end charitable contributions.
Research Charitable Organizations
The IRS defines charitable organizations as those operated exclusively for charitable, educational, literary, scientific, testing for public safety, or other specified purposes. They must also be tax-exempt under Internal Revenue Code Section 501(c)(3). However, donations made to supporting organizations and donor-advised funds are not qualified for the $300 deduction under this particular tax provision.
If you choose to donate to a charitable organization, it’s a good idea to use the IRS’s Tax Exempt Organization Search (TEOS) tool found on their website, at irs.gov.
Another excellent way to ensure your monetary donation is being made to a reputable organization is to use a third-party website, such as Charity Navigator. Charity Navigator has rated 195,000 charities based on several factors, so charitable givers can be assured they are supporting a good charity.
Keep Records of Your Contributions
When donating to a qualifying 501(c)(3) charitable organization, it is crucial to keep records of your contributions, including but not limited to “obtaining an acknowledgment letter from the charity before filing a return and retaining a canceled check or credit card receipt” (IRS, 2021). Additional record keeping rules may apply when claiming the $300 deduction for monetary contributions. Because of this, it is important to consult a certified public accountant who can help you retain and organize essential records, along with providing tax planning and preparation services.
Consult a Houston CPA Firm for More Information
Hollis Lewis & Company, PLLC is a Houston CPA firm committed to providing our clients with professional and personalized tax preparation, accounting solutions, and business services. Our certified public accountants are respected financial advisors with two conveniently located offices in Harris and Montgomery counties and more than 90 years combined experience. Please don’t hesitate to contact us today to discuss your unique accounting, business, or tax planning and preparation needs.
“2020 Publication 526: Charitable Contributions.” Department of the Treasury: Internal Revenue Service (IRS).
“Exempt Organization Types: Charitable Organizations.” Department of the Treasury: Internal Revenue Service (IRS).
“Holiday Giving Guide.” Charity Navigator.
“Special $300 tax deduction helps most people give to charity this year – even if they don’t itemize.” Department of Treasury: Internal Revenue Service (IRS): IR-2020-264, November 25, 2020.
“Year-end giving reminder: Special tax deduction helps most people give up to $600 to charity, even if they don’t itemize.” Department of the Treasury: Internal Revenue Service (IRS): IR-2021-214, November 3, 2021.