The Internal Revenue Service, along with the Independent Sector and National Council of Nonprofits, highlighted a pandemic-related tax provision that permits more people to deduct donations to qualifying charities on their 2021 federal income tax return.
The IRS is highlighting the temporary provision as many charitable organizations are struggling during the pandemic.
Under this temporary provision, married couples filing jointly can deduct up to $600 in cash donations and individual taxpayers can deduct up to $300 in donations. Taxpayers will not need to itemize deductions of their tax returns to take advantage of the provision, which creates tax-favorable donation options not normally available to about 90 percent of tax filers.
The provision allows taxpayers to claim a limited deduction on their 2021 federal income tax returns for cash contributions made to qualifying charitable organizations by year's end, Dec. 31, 2021. Ordinarily, taxpayers who choose to take the standard deduction cannot claim a deduction for their charitable contributions.
The IRS’s Tax Exempt Organization Search tool on IRS.gov can help people ensure they donate to a qualified charity.
"The pandemic has created unique challenges for tax-exempt organizations, and we want to make sure people don't overlook this special tax deduction that's available this year," said Sunita Lough, IRS commissioner of the Tax Exempt and Government Entities division. "Donations to qualifying charities can reduce people's tax bill when they file in 2022."
Charitable groups have been hit hard by the pandemic, with some seeing reduced charitable donations and other increased demand for their services, according to leaders from the National Council of Nonprofits and the Independent Sector.
"At a time when nonprofits continue to see immense demand for services, are facing significant challenges hiring and retaining staff to deliver those services--every donation counts," said David Thompson, vice president of public policy at National Council of Nonprofits. "We're thankful that the universal (or non-itemizer) deduction is available through the end of the year to encourage every taxpayer give a little bit more to the missions they care about."
"Over the past two years, charities have helped America confront generational health, economic and social crises. They have answered the call to serve their communities despite facing lost revenue, disrupted operations and dramatically increased need," said Daniel Cardinali, president and CEO of Independent Sector. "Congress has sent a powerful message that everyone – not just those who itemize on their taxes – has a role to play in helping meet this moment, and we know people in America will respond in kind. We hope charitable contributions and deductions will increase in the coming years."
A more limited version of this temporary tax benefit was included in the CARES Act and only applied to tax year 2020, with the Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted last December, generally extending it through the end of 2021.
Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify, according to the IRS.
