A Special 2021 Tax Deduction

If you give to charity but take the standard deduction, you typically do not get a tax benefit for your charitable giving. Because of this, many individuals stopped recording their charitable gifts on their tax return because it was simply a waste of time.

However, your 2020 taxes are a bit different. Congress authorized a special charitable giving deduction last year to help increase donations, as many charities suffered through the pandemic. Because of this, you are likely eligible to deduct up to $300 in charitable donations as an “above-the-line deduction.”[i] This deduction is even better than a typical charitable deduction, which only lowers taxable income. This special deduction, lowers adjusted gross income AND taxable income, which can help lower Medicare premiums or Social Security taxes and increase various other credits and deductions.

The picture below shows where the special tax deduction appears on your tax return. As you’ll see, the amount contributed (on line 10b) directly reduces adjusted gross Income (on line 11).

In 2021, they extended the tax deduction so that each “tax unit” could claim $300, so a married couple filing jointly could potentially deduct $600 when they do their 2021 taxes in 2022.[ii]

Thank you for reading,

Alex

This blog post is not advice. Please read disclaimers.

[i] “Special $300 Tax Deduction Helps Most People Give to Charity This Year – Even If They Don't Itemize.” Internal Revenue Service, 25 Nov. 2020, www.irs.gov/newsroom/special-300-tax-deduction-helps-most-people-give-to-charity-this-year-even-if-they-dont-itemize.

[ii] Waggoner, John. “Get $300 Tax Deduction for Cash Donations in 2020, 2021.” AARP, 5 Jan. 2021, www.aarp.org/money/taxes/info-2020/how-to-deduct-2020-charity-donations.html#:~:text=For%202020%2C%20the%20charitable%20limit,for%20a%20total%20of%20%24600.