Reminder: Get $300 In Tax Deductions With Charity Donations (2020 Only)

(Update 12/21/20: Congress now passed a bill to allow $300 in charity deductions for 2021 as well. Couples filing jointly can get $600 in 2021, but for 2020 they are still limited to just $300.)

Quick reminder that as part of the stimulus bill earlier this year, congress passed into law a $300 above-the-line tax deduction on charitable contributions for those who do not itemize their deductions.

At the time, it was assumed by many that the $300 deduction is permanent – for years 2020 and all future years – but now it’s being said to be only for the year 2020, a one-off deal. So if you have any charity you’re planning on doing, it’s a good idea to do it before December 31 and lock in the tax deduction.

Another note: initially, it wasn’t clear whether couples filing jointly will be able to double up on this deduction, but it’s since become clear that the deduction is limited to $300 total, even for couples filing jointly.

Finally, it’s worth noting that there are a few charities that you can donate with Chase Sapphire Preferred and get the 1.5 PYB points cashout with. If you find those charities interesting, that could be an additional way to stack this.

I’ll paste below what we wrote back when the bill passed, incorporating the above corrections:

Since the tax overhaul in 2018, there aren’t many people who consistently itemize their tax deductions since the Standard Deduction increased greatly making it more advantageous for most people. For 2020, the standard deduction is $12,400/single or $24,800/couple.

The huge stimulus bill – the bill which gives most U.S. Residents $1,200 – also contains an added tax deduction of up to $300 on money donated to eligible charities for people who do not itemize their deductions. (Those who do itemize already get all their charity deducted on their taxes.) There’s no mention in the bill of those couples who file jointly getting $600. Some presume that joint-filers will get a $600 deduction. (Update: seems this is not the case – the deduction is limited to $300 even for those filing jointly.)

Interestingly, this change is relevant for 2020 and beyond, it’s not tied to 2020 or to the pandemic. Donations since January 1, 2020 will qualify, and the deduction will apparently continue into 2021 and beyond. This is no longer thought to be true.

Let’s say you are in the 24% federal tax bracket and you give $300 in charitable contributions to 501(c)(3) tax-exempt organizations. You’ll then be able to deduct that $300 off your taxable income, and you save $72 on your taxes. That’s on top of your standard deduction. The goal apparently is to increase charitable contributions. Regardless, if you anyway give charity, be sure to do it in a traceable way (e.g. check or credit card) and then claim the deduction on your tax return. Donations $250 or more need a receipt from the charity as well.

A few other details:

  • The bill limits this $300 deduction to donations made directly to a charity, not to a donor-advised fund.
  • The bill also mentions that it’s limited to cash donations, which  seems to exclude things like clothing donations.
  • Not clear if a donation of stock would classify as a ‘cash donation’. Update: Apparently it does not count.
    Chuck
  • On December 15, 2020, 13:00
Tags: charity

View Comments (42)

  • Open to be corrected from a tax point of view but if you sell on eBay, designate some or all to charity and then pay that, it should be a contribution. In my experience paying the charity part to ebay has coded as 3% online category with BoA. I’m not on the margins of this but like it because ebay fees also are avoided. I’ve been able to sell items for 20x what it would yield if donated to a local thrift store

    Just make sure to invoice the donation amount and pay it this year. Charity is your choice

  • I mentioned this in a reply below, but thought it deserves it's own post.

    a $300 deduction is not the same as a $300 credit or $300 back.

    Some common tax rates are 0%, 10%, 12%, 22%, and 24% . A $300 deduction is likely to save you between $0 and $72 on your taxes.

    Please do go ahead and donate. I have found that It's easy for a person or organization to overhyped the tax benefit in a zealous effort to get people to contribute to a cause they are passionate about.*** You should donate to important causes, but generally tax benefits will be second to the knowing that you helped a worthy cause.

    ***Not necessarily intentionally. Taxes are a mystery to most people.

    • Want to point out that in Arizona we do have a $400 dollar credit for donations so Arizona people would get a Net Gain from donating.
      $0-$72 in Federal Tax reduction + $300 dollar credit from AZ govt

      • Ana, that'd reduce an AZ tax bill by $310 plus federal deduction, not just $300. AZ income tax rates are: 2.59%, 3.34%, 4.17%, 4.5%, and 8%. A $300 deduction reduces federal AGI reported on line 12 of AZ Form 140 (and using 3.34% here as an example) it'd thereby reduce AZ taxes by $10 before even taking a $300 credit.**
        **Note: A qualifying charitable organization must be certified by the AZ Dept of Revenue to claim the contributions. That means donations made to many notable charities such as DAV, Red Cross, or PetSmart Charities won't count for AZ's tax break. However, looking by city and zip code, I discovered some new causes and a few recognizable ones on the list such as local VFW, Salvation Army, NAMI, Meals on Wheels, Habitat for Humanity, and Goodwill. https://azdor.gov/tax-credits/contributions-qcos-and-qfcos

  • Relevant line in the draft 1040 instructions: "$300 is the most you can enter on your return even if your filing status is married filing jointly."

    It is the draft instructions, so it could change. I wouldn't hold my breath, though.

    • As with regular donations, it should be the total of all donations across any number of charitable organizations.

Leave a Comment