Millions of Americans donate this to charity Third Giveaway or any other time this year can take advantage of a certain tax break, and it may be their last chance for a while.
Under current tax law, people who take the standard deduction on their tax returns can also get a tax deduction for charitable contributions up to $300. The deduction is up to $600 for couples filing jointly.
Mark Steber, director of tax information at Jackson Hewitt, the national tax return chain, said the $600 increase could be a boon to a married couple’s tax bill. Steber estimates, a couple earning about $75,000 to $80,000 and facing an effective tax rate of 25% could reduce their taxes by $150 with $600 in charitable contributions.
Before the pandemic, if taxpayers wanted to exploit the tax rewards of a charitable donation, they had to include their tax deductions, including charitable contributions. But most people choose the standard deduction, said Erica York, an economist at the Tax Foundation. “For most people, there is no tax benefit to giving,” she notes.
That has changed during the pandemic.
In an effort to encourage philanthropy at a time when so many Americans need help, the $2.2 trillion CARES Act, passed in March 2020, authorized 300 dollars Deduction “on line” for individuals and couples to make charitable contributions. That write-off applies to qualifying contributions through the end of 2020. The CARES Act also expands tax rules to those who itemize their charitable contributions.
A household that earned $75,000 in taxable income last year could have reduced its federal tax bill by $36 with a $300 deduction, according to one theoretical prediction. A household with a taxable income of $100,000 gets $66 off tax liability, an expert previously told MarketWatch.
The total size of donations last year broke records. Charities have estimated 471 billion dollars, according to a report from Giving USA.
Congress extended the deduction when it passed a $900 billion bus spending bill by the end of 2020, which also allows for steps like a second round of stimulus checks. The same $300 deduction applies to individuals in 2021, but married couples can now receive up to $600 in charitable contributions.
York and Steber note that the current regulation is expected to expire later this year. The $1.75 trillion Social Security Bill passed by the US House of Representatives earlier this month is filled with new tax provisions – like more taxes on the rich and corporations, York said. — but it has no provisions relating to philanthropy, York said. The bill still needs to pass the Senate.
It’s possible that charity-related deductions could last longer through other laws, but that remains to be seen, she noted. Either way, York said she doesn’t think the potential tax benefits are “the biggest driver of most Americans’ contributions.”
According to a recent survey from Classy, a donation platform, nearly half (47%) of people said passion for a cause is the top reason they donate to NGOs. specific profits. Only 4% said tax deductions were the top reason.
Steber said he wouldn’t be surprised if the break was somehow extended. “It’s very popular with taxpayers, it’s popular with charities, it’s the right thing to do,” he said.
The Internal Revenue Service notes that contributions that qualify under the write-off must be cash contributions. In general, taxpayers should receive written recognition for contributions over $250, the IRS said.
Those considering donating to organizations can claim their organization’s nonprofit status through the IRS tax-exempt organization. search.
The deduction could be a way to simultaneously do some good with simple contributions at the end of the year, says Steber, while reducing a household’s tax liability.
Source link Tuesday so far, don’t forget to take this tax break – it could be your last chance