You’ve done good during the pandemic. You’ve given at food banks, volunteers in your community and donated money. Now that it’s tax time, are you wondering if and how to deduct charitable giving? Happily, charitable giving –aside from being good for the soul and the community – could also be good for your bottom line, a win-win for everyone.
Before we get into the nitty gritty, I suggest that you check with your CPA to find out how much each charitable dollar will create in tax savings if you itemize.The rule for people who don’t itemize is that they are entitled to a $300 deduction for all monetary gifts in 2020. Understanding the tax savings your charitable donations create might help you decide to increase your giving at year end.
How Volunteering Can Be a Tax Deduction
Volunteering took on a whole new meaning in 2020. Maybe you were an occasional volunteer in the past, but increased your actions in 2020 with the overwhelming need created by the Pandemic. Unfortunately, you can’t deduct the cost of time you spent volunteering for charities. However you can deduct other things such as …
- Traveling to and from somewhere on behalf of a charity is tax deductible. If you keep good records of your car costs you can allocate related costs to your volunteering activity such as gas, repairs, and insurance. Or you can opt for the flat rate deduction allowed by IRS at 14 cents per charitable mile.
- Uniforms. You may deduct the cost of the uniform you wore during you volunteering activity.
- Fund raising activities. If you hosted and/or organized fund raising activities for a charity, you may deduct the entire cost of catering, mailing, deliveries and other costs you incur in association with promotion and fund raising for the charity.
If you transferred funds directly from an IRA to IRS-approved charitable organization …
This strategy is only available to taxpayers over age 70-½ who own a traditional IRA. After reaching age 70-½ , you can make a qualified charitable donation directly to an IRS-approved charitable organization and the amount donated counts towards required minimum distribution (RMD). Always keep receipts for all charitable donations you make.
Two Bonus Tips!
- Credit card gifts made by December 31 are deductible on your 2020 tax return even if you don’t pay the credit card bill until 2021. Keep good records of your donations as you will need them at tax time.
- Charitable bunching – yes, it’s a thing — is for those tax payers who would like to plan for itemization by bunching two years worth of giving into one.
If you have any questions, please schedule a free 15-minute consultation with me here.
I also would love to hear from you if you are a professional writer and looking for more specific tips for you on travel deductions, home office deductions or if you want to enjoy the myriad benefits of incorporating.
Photo: Joel Muniz, Unsplash