Usually, charitable deductions are only available as an itemized deduction. When you file your federal taxes, you have the option to take either the itemized deductions or the standard deduction. The standard deduction in 2020 is $12,400 for an individual and $24,800 for a couple who apply together. In other words, even if you don’t have any itemized deductions, you can still claim the standard deduction. Therefore, in order to itemize your deductions, you will need more itemized deductions than the standard deduction to make it worth it to do so.
Let’s see how this works. Let’s say Mary is one individual and has an income of $100,000. It has $5,000 in state and local taxes and makes $6,000 in donations to charity. It does not have other discounts detailed. Her itemized deductions total would be $11,000. However, if you opt for the standard $12,400 discount amount, you’ll be better off. Even if Mary increased her charitable donations by $1,400, she would still be in a good position to take the standard deduction because only then would the total itemized deductions equal the standard deduction of $12,400.
However, for the 2020 tax year, you can take an “above the line” deduction of up to $300 for cash donations made to a public charity. This means that if you don’t part and take the standard deduction amount, you can still claim a deduction of up to $300 for donations to charity. Donations must be cash and must be to public charities, such as your church or church alma mater.
Let’s look again at Mary’s situation. Donations of $6000 have been made to charity. If $300 of those donations are cash to a public charity, they can take those donations as an over-the-line deduction and still claim the standard $12,400 deduction for 2020.
This special rule came from the “CARES” Act that was Congress’ response to the pandemic to encourage more charitable giving. You can only take the above discount if you do not detail. The maximum discount is $300, whether you are a single file holder or a couple applying together.
It is said in the Bible that “it is more blessed to give than to receive”. Acts 20, 35. Thanks to the availability of the $300 charitable discount above the line this year, it’s easier than ever to get a charitable discount when you donate.
Stephen C. Hartnett, JD, LLM
American Academy of Estate Planning Lawyers, Inc.
9444 Balboa Street, Suite 300
San Diego, CA 92123
Phone: (858) 453-2128