This Giving Tuesday, don't forget to keep track of your donation receipts.
That's because individuals can write off up to $300 in cash donations, and up to $600 for married couples filing jointly, made to qualifying charities in 2021, regardless of if they take the standard deduction or itemize their taxes. Typically, only those that do the latter can write off donations, but Covid-era laws changed that for 2020 and 2021.
The tax change alone isn't a reason to give more this year, but it is good news for the estimated 90% of households that take the standard deduction each year.
However, for donations to count as a tax deduction, there are a few requirements.
First, they must be made to eligible organizations. You can use this tool on the IRS's website to quickly see if the organization you want to donate to qualifies. That said, not every qualifying organization is listed there. You can also look on many organizations' websites for a determination letter from the IRS.
Keep in mind that donations made to individuals are not tax-deductible. So if you gave to a GoFundMe campaign that wasn't linked to a charity, it likely does not qualify (that's no reason not to give, of course).
Second, the donations must be made in cash (including by check, credit card or debit card), and you'll need the receipts. Volunteering, or donating household items or other property does not count.
Let's say a married couple with an effective tax rate of 25% jointly donated $750 throughout the year. If they take the standard deduction, they'd be able to deduct the full $600, lowering their federal tax liability by $150.
There's one other important change to individual charitable giving this year. Those who itemize typically can write off up to 60% of their adjusted gross income for qualifying cash contributions. This year, they can write off 100%.
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