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Tax Tip: Donating To a Charity May Decrease your 2021 Tax bill

Want to lower your tax bill and support your favorite charity at the same time? Great!! The CARES Act, enacted in March of 2020, included a limited temporary tax benefit for the tax year 2020. However, The Taxpayer Certainty and Disaster Relief act of 2020, enacted in December 2020, extended the tax deduction through December 31st, 2021.

What does that mean?

This provision allows eligible taxpayers to deduct up to $300 in cash charitable donations, per taxpayer, on the return on their 2021 tax return as an above-the-line deduction. This means even taxpayers who elect to use the standard deduction instead of itemizing their deductions can take advantage of this tax-saving strategy. There are a few things to keep in mind when utilizing this deduction.

  1. Must be a CASH donation – donating items to a non-profit does not count
  2. Donation must be complete by midnight on December 31st, 2021
  3. You can deduct up to $300 for taxpayer using Single, Married Filing Separately, or Head of Household status
  4. You can deduct up to $600 for Married Filing Joint taxpayers
  5. The donation must be to a qualifying charity. The special Tax Exempt Organization Search tool on IRS.gov can help people make sure they donate to a qualified charity.
  6. Keep good records.

How can this save you taxes?

An above-the-line deduction reduces your Adjusted Gross Income (AGI). For example, let’s say you are in the 15% tax bracket and you donate $300 to Aiden’s Kidney Transplant That $300 will reduce your AGI by $300 and will thereby reduce your tax by $45.

Depending on your income some refundable or non-refundable credits could give an added benefit of increasing; meaning your overall tax savings could be more than $45.

Does your employer match donations?

In addition to the donation you make from your own budget you may have an employer that matches donations, most match donations, dollar for dollar up to a certain amount. Let’s say your specific employer does a dollar matching program up to $200. How does this stack up? Well, you donate $300 to Friend’s Fur Change in Chickasha, Oklahoma, and submit the matching paperwork to your employer. Your $300, just turned into a $500 donation (but, you can only deduct up to the amount you actually paid), plus it saved you a minimum of $45 in taxes.

Some of our favorite Charities

If you aren’t sure where to donate and you don’t want to spend the time determining the who, what, when, and where of charities here are a few of our favorites along with what they do. We work to focus on local, grassroots-type charities as we know that’s where the dollars seem to be the hardest to come by and the biggest needs as they are not bogged down with high overhead costs.

  • Aiden’s Kidney Transplant – This fund is specific to my own family and is held in an account by a non-profit called Children’s Organ Transplant Association. This association supports families who have children with serious health issues. There are never any fees to any families and the association has a wonderful checks and balances system in place to ensure all monies donated go only for the direct medical costs of the individual. Want to see if there is a tranplant family in your area? COTA has a search feature based on zip code, type of transplant, etc.
  • Friends Fur Change – This non-profit located in Grady County, Oklahoma is dedicated to helping abused and neglected animals in the county (outside of city limits) receive the veterinary care they need along with helping to find them loving furever homes, many times those homes are out of state. The only services who support animals outside of city limits are volunteer based and donor funded. Donations can be made by PayPal or by mail. If you would like to read more about what they are doing, join Friends Fur Change *Chickasha Ok* Facebook Group.
  • Invisible People – A 501(c)(3) nonprofit dedicated to educating the public about homelessness through innovative storytelling, news, and advocacy. Since our launch in 2008, Invisible People has become a pioneer and trusted resource for inspiring action and raising awareness in support of advocacy, policy change and thoughtful dialogue around poverty in North America and the United Kingdom. Check out the Invisible People YouTube Channel.