Special tax deductions available this year for cash donations to charities; IRS works to raise awareness

The CARES Act, enacted by Congress last spring, includes a special $300 deduction designed especially for people who choose to take the standard deduction, rather than itemizing.

Get to know the IRS, its people and the issues that affect taxpayers

By Edward T. Killen
CL-20-07, December 1, 2020

At the IRS, we work to support our nation’s charities in many different ways. In my organization, we oversee the tax-exempt groups that do vital work for our nation. And many of us who work for the IRS use our free time to volunteer and contribute in countless ways to charitable organizations and churches across the country.

This year, there’s an additional component at play with so many people, businesses and organizations struggling due to COVID-19. Many people may not realize it, but there’s a special tax deduction available for them through Dec. 31, 2020 for cash donations up to $300 to qualifying charities.

As we enter the season of giving, I encourage people to take a few minutes to understand this new change. This could help taxpayers when they file their taxes in 2021 – and help many organizations across the country as they try to help people coping with the coronavirus. Many charities are struggling this year, and donations for many are down.

The Coronavirus Aid, Relief and Economic Security (CARES) Act, enacted by Congress last spring, includes several temporary tax changes helping charities. This includes a special $300 deduction designed especially for people who choose to take the standard deduction, rather than itemizing their deductions.

What does this mean for the average taxpayer? Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify for this new tax deduction. Our most recent figures from 2018 show more than 134 million taxpayers claimed the standard deduction, representing more than 87% of all filers.

So if someone makes a cash donation to a qualifying charity before the end of 2020, they can get a deduction of up to $300. This will be easy to report when they fill out their Form 1040 in 2021, especially if they file electronically.

The deduction lowers both adjusted gross income and taxable income – translating into tax savings for those making donations to qualifying tax-exempt organizations.

Here’s an important step to remember: Before making a donation, use the special Tax Exempt Organization Search (TEOS) tool on IRS.gov, developed by my organization, the IRS's Tax Exempt and Government Entities division, to make sure an organization is eligible for tax-deductible donations.

All too often, we see fly-by-night organizations pop up trying to take advantage of natural disasters and people’s good will in the name of charity, when in reality they don’t have tax-exempt status. This can damage the reputation of noble charitable organizations and undermine confidence in charitable giving at the very time where generosity and help are most needed. So, before making a donation, we encourage everyone to take a moment and use the TEOS tool to make sure the charity is legitimate. We have more information available in Publication 526, Charitable Contributions, and on the TEOS site.

Here are a couple of other important reminders:

• Taxpayers: Keep good records when you donate. Under the law, special recordkeeping rules apply to any taxpayer claiming a deduction for a charitable contribution. This is an easy step to take; usually, it means simply getting a receipt or acknowledgement letter from the charity before filing your tax return and retaining a cancelled check or credit card receipt.
   
• Charities: Don’t forget to file your Form 990. By law, most tax-exempt organizations other than churches and certain church-related organizations are required to file with the IRS. We frequently see instances where smaller – but well-meaning – groups overlook filing for three consecutive years. When that happens, the IRS is required to automatically revoke their tax-exempt status. We urge these groups – which sometimes can see frequent leadership turnover – to not overlook the requirement to file a tax return. We have a wealth of information available to help.
   
• Other CARES Act provisions: The new law created other temporary provisions designed to help charities. These include higher charitable contribution limits for corporations, individuals who itemize their deductions and businesses that give food inventory to food banks and other eligible charities. For more information about these and other COVID-19 provisions, visit IRS.gov/coronavirus.

As the difficult year of 2020 comes to a close, there is still time to make a difference in many different ways. We want you to know that one of those can be helping a charitable group, and at the same time helping your tax situation when you file in 2021. 

All of us at the IRS have worked as hard as possible to make a difference for people during this challenging year – both at work and in our communities across the nation. Personally, I take great pride in both our people and the work that we do on behalf of America’s taxpayers to maintain the integrity of the tax-exempt sector. And as 2021 begins, we will continue these efforts to help in both the tax-exempt arena and other areas.

Edward T. Killen
Acting Commissioner, Tax Exempt & Government Entities