Your guide to charitable tax deductions

Most people can deduct some charitable donations for 2021

Derek Silva

By

Derek Silva

Derek Silva

Personal Finance Expert

Derek is a personal finance editor at Policygenius in New York City, and an expert in taxes. He has been writing about estate planning, investing, and other personal finance topics since 2017. He especially loves using data to tell a story. His work has been covered by Yahoo Finance, MSN, Business Insider, and CNBC.

Published June 11, 2021|8 min read

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Donations and other gifts to charitable organizations are generally tax deductible. The charitable contribution tax deduction has historically been available only to taxpayers who itemize their deductions, but there is a new $300 deduction that people who don’t itemize can claim in 2020 and 2021. If you are itemizing, income limits have also been lifted so that you can give as much you want in 2020 and 2021.

Key Takeaways

  • The charitable contribution deduction is an itemized deduction that you can claim on Schedule A

  • For 2020 and 2021, there is a new $300 charitable deduction for anyone who claims the standard deduction

  • When itemizing, there are no AGI limits for charitable deductions in 2020 or 2021

  • Always keeps a record of your charitable giving, especially if you have individual donations worth at least $250

The 2 ways to deduct charitable contributions

There are two main ways for an individual to deduct charitable contributions on their 2020 or 2021 taxes:

  • The charitable contributions deduction

  • The temporary $300 above-the-line charitable deduction

What is the charitable contribution deduction?

The charitable contribution deduction is a type of itemized deduction, so anyone who itemizes can claim it. Unfortunately, itemizing isn’t worth it for many taxpayers after the Tax Cuts and Jobs Act of 2017. That Act increased the standard deduction and itemizing is generally only worthwhile if your itemized deductions are more valuable than your standard deduction. Most people are better off taking the standard deduction this year, which means most people don’t have access to the charitable contribution deduction.

Related: Who benefited most from the 2017 Trump tax cuts?

What is the above-the-line charitable deduction?

In 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) created a new $300 charitable contributions deduction that’s available to tax filers who claim the standard deduction (thus making it a type above-the-line deduction). This was a brand new tax break, and it allowed filers to deduct up to a maximum of $300 regardless of their filing status.

The above-the-line deduction was extended for the 2021 tax year (the taxes you will file in early 2022) and it was updated so that joint filers can now receive a deduction worth up to $600 [1] . The maximum deduction for non-married filers is still $300.

Who can claim the charitable contribution deduction?

The $300 above-the-line deduction is available to basically all taxpayers in 2021 if they take the standard deduction. There are no other requirements, though you may not be able to claim it if you file Form 1040-NR.

To claim the itemized charitable deduction, you need to itemize deductions by completing Schedule A with your tax return. Anyone who itemizes can claim the charitable tax deduction, though itemizing isn’t worth it for many taxpayers.

Should you itemize deductions?

You should generally itemize if your total itemized deductions are worth more than your standard deduction. So whether or not you should itemize really depends on the other types of deductions you can claim and how much they’re worth.

There aren’t actually many types of itemized deductions. Here are the other main ones:

For reference, here are 2021 standard deduction values. (People who are legally blind or 65 or older also qualify for an additional standard deduction.)

2021 standard deductions

Filing status        Standard deduction amount
Single               $12,550              
Married filing jointly$25,100              
Married filing separately$12,550              
Head of household    $18,800              
Qualified widow(er)  $25,100              

What is a qualifying charity?

Only qualified organizations are eligible for tax deductions when you donate to them. Just because a group is a nonprofit doesn’t mean that they’re eligible and political organizations generally aren’t eligible. Individuals also aren’t eligible for charitable donations, so donating to someone (like to help pay a person’s medical bills) would not qualify you for a deduction.

If you’re unsure whether a charity qualifies for the deduction, ask them before donating. They should be able to provide you with their tax ID, which you can then look up using the IRS’ Tax Exempt Organization Search tool. Each qualified organization has a unique, nine-digit federal tax ID called an Employer Identification Number (EIN).

Common types of qualified charitable organizations can include churches, mosques, synagogues, temples, Boys and Girls Clubs of America, Goodwill Industries, Red Cross, Salvation Army, United Way, fraternal orders, veterans' groups, certain cultural groups, nonprofit hospitals, medical research organizations, and most nonprofit educational organizations. [2]

Which donations qualify for the charitable deduction?

A qualifying contribution is generally something that you are giving freely without the expectation of receiving something of equal value in return. Eligible charitable donations can fall into two basic categories: cash and non-cash items.

Cash contributions

A cash contribution is any money you give to an organization, whether you pay with physical cash, a check, by credit card, or through some other third-party service. You can generally claim the entire amount of your cash donations but if you received something in return for the donation, you can only deduct the amount you gave that’s in excess of the value of what you received.

If you buy something from a charity, like at a charitable auction, you can claim a deduction for the price you paid that’s in excess of the item’s fair market value. So if you pay $100 for a painting that’s worth $40, you can deduct $60. However, you must be able to prove that you knew the value of the item before buying it. If a charity published an estimate of an item’s value before auctioning it off, having that reported value is likely enough to determine your eligible tax deduction. [3]

Non-cash contributions

Non-cash contributions include any physical items you donate — like a car, clothes, or furniture — in addition to anything that isn’t cash — like investments or cryptocurrencies such as Bitcoin.

The value of non-cash donations is generally the item’s fair market value. The IRS defines fair market value (FMV) as the price “a willing buyer would pay a willing seller when neither has to buy or sell and both are aware of the conditions of the sale.” In plain English, FMV is the price at which no one feels like they’re getting ripped off. Some organizations offer guidance on determining FMV, like the Donation Value Guide from the Salvation Army. For more valuable contributions you may need a third-party appraisal.

If the charity sells the car, you can only write off (deduct) the amount that it was able to get for selling the car, even if the charity got less than the fair market value.

How to claim a charitable deduction on your taxes

If you’re claiming the above-the-line charitable deduction, all you need to do is write the amount of your charitable contributions (up to the limit) on the correct line of Form 1040. The deduction was on line 10b for 2020 taxes. Here’s how to fill out your Form 1040 if you need more help.

If you’re itemizing to claim the charitable deduction, just fill out the "Gifts to Charity" section of Schedule A by entering the amount of money or the value of items that you donated. (Here’s our guide on how to fill out Schedule A.) There are some extra steps if you made individual donations worth at least $250, plus an extra form to fill out if you had donations of $500 or more. There are also income limits for charitable donations, which we discuss in a later section.

Always keep a record of your donations in case you ever have to go through an IRS audit. If the organization doesn’t give you a receipt, ask for one. A copy of your credit card statement or bank statement may also be enough if it’s clear who received the payment.

Steps for donations worth $250 or more

For gifts of $250 or more — whether they’re cash or non-cash donations — you need a statement from the charity confirming how much you gave and whether or not you received anything in return.

If you did get something in exchange for your donation, you can only deduct the amount you donated that’s worth more than the value of what you received. As a simple example, if you donate $20 for a charity sandwich, and the actual value of the sandwich is $5, you can only write off $15.

It’s important to clarify that the $250 threshold is for an individual donation, not the total from separate donations. The IRS gives a good example: If you donate $25 to your church every week, each weekly donation counts as a separate gift. Even though your total donations for the year would be $1,300, you wouldn’t need to get a statement from the church about what you gave because none of your individual donations was $250 or more.

Steps for donations worth more than $500

Anyone who made a non-cash donation worth more than $500 will need to fill out IRS Form 8283. You don’t need this form for cash donations (including payments you made via check or credit card).

Form 8283 requires more information about the item you donated and its condition. For example, if you donate a car, you’ll need to provide information like its year, make, model, and mileage.

There’s also a section on Form 8283 that you need to fill out if you’re claiming a donation of more than $5,000 for a single item. You usually need an appraiser to validate the cost of the donation in that case.

Limits for charitable tax deductions

There are no limits on the amount of charitable contributions you can deduct in 2020 or 2021, because the limits were lifted during the coronavirus pandemic. In previous years, you could only claim deductions in a given year for charitable gifts worth up to 50% of your adjusted gross income (AGI). If you have any deductions you can’t claim because in a year, you can carry over excess donations for up to five years.

For example, let’s say your AGI for the year is $50,000 and you donated $70,000 of eligible donations. Normally, you can only claim $25,000 in deductions for the first year since that’s 50% of your AGI, but you could claim another $25,000 next year (assuming your AGI stays the same) and then the final $10,000 the year after.

Limits for certain property

In certain cases, there are further deduction limits of 20% or 30% of your AGI. This could apply for certain organizations and certain types of property donations, like items held in a trust but used by a charitable organization. For more guidance on these limits, read IRS Publication 526.

Limits for tax returns before 2018

If you’re filing a tax return for 2017 or earlier, there is an overall limit to how much you can take in itemized deductions (remember: charitable donations are just one type of itemized deduction). This limit was suspended during 2017 tax code changes, but is set to expire after 2025.