Tax Calculation

Expanding Tax Break for Charitable Giving Proposed by Lawmakers

There is talk of a new bill that is set to be introduced by a group of bipartisan lawmakers. The new bill would expand a tax break for charitable donations to help boost donations for nonprofits during this difficult time.

The new bill has been introduced by Sens. Chris Coons, D-Del., and James Lankford, R-Okla. It has been named the Universal Giving Pandemic Response Act, and it aims to allow taxpayers who don’t itemize to get a charitable contribution deduction.

The tax deduction is expected to be one-third of the standard tax deduction for 2019 and 2020. Individuals that want to donate will benefit from a tax deduction of $4,000 and $8,000 for married couples. This will allow more of the donated money to go to charity.

Hopefully, this new bill will incentivize more companies and individuals to donate during this turbulent time. COVID-19 stopped a lot of fundraising events and squeezed people’s finances meaning charities have had a rough time over the 4-5 months.

The new bill adds to the $2.2 trillion CARES Act that was brought into effect at the end of March this year. The CARES Act included a max $300 charitable deduction who do not wish to itemize their claim at the end of the year. 

This year, those who make donations before the July 15 filing deadline will be able to claim those deductions under the new bill on their 2019 tax return. If they have already filed their tax return for 2019, they can request an amendment to benefit from the latest changes.

The bill is a welcome relief to charitable organizations that have seen a significant drop in donations during the coronavirus pandemic. Many charities have been left struggling to survive, and this bill may help them bounce back much quicker. 

Are charitable contributions deductible in 2020?

Hand with Piece of bread

Individuals can usually deduct up to 60% of their adjusted gross income via charitable donations. However, they may be limited to 20-50% depending on the type of contribution you make and the organization the donation is made to. 

Corporations are able to donate up to 25% of it’s taxable income.  

The following have a lower limit:

  • Private foundations
  • Veterans organizations
  • Fraternal societies
  • Cemetery organizations

The limit given applies to all donations that you make throughout the year. The amount of different organizations is not essential, it’s purely about the figure. 

Any contributions that exceed the limit are often able to be deducted on your tax returns over the next five years. Or until it is wiped off, this is called carryover.  

For 2020, you can deduct up to $300 of cash donations without having to itemize. The new bipartisan bill being introduced will aim to expand this tax deduction.

Can I write off charitable donations in 2020?

You can deduct your charitable contributions of either money or property to religious or service organizations, like churches and various charities.

They usually will need IRS 501(c)3 tax-exempt status to do this. Typically, your charitable donations limit is 60% of your gross income. But this will vary depending on the type of donation and type of charity. 

A qualified organization is able to deduct 100% of their donations, but only if the donations are used specifically for charitable purposes. You can find a list of the qualifications for corporations under code 170(c)(1) or on Publication 526.

How does the new tax law affect charitable donations?

The proposed bill being introduced will allow companies and individuals to get a tax break on their charitable giving. This helps lower the cost of charitable donations by the amount of taxes saved.

This is excellent news for individuals and charities. It should incentivize more people to give to their favorite charities and help individuals reclaim more tax on what was paid on each donation throughout 2020.

How much can I claim for charitable donations without getting audited?

Kids in Africa

If a charitable donation is claimed, it can only be for a cash donation and not a property donation. That cash amount must be less than $250. Any donation over this amount without a receipt may get picked up on a random audit by the IRS.

Without a receipt, vast sums of money will get picked up by the IRS and, without a receipt, is technically committing fraud. You must provide a bank record or a payroll-deduction record to claim the tax deduction. You will also need a receipt and any other proof for cash donations over $250 or non-cash donations (like property).

The IRS requires disclosure if there is a cash contribution of more than $500. For non-cash donations, you can find full details of determining the value of the donated property on Publication 561.

How do I claim tax-deductible donations on my tax return?

When it comes to tax time, you are best itemizing your tax return. When you file your tax return each year, you will need to itemize your tax deductions. This will allow you to claim tax-deductible donations legally.

You will need to fill out Schedule A along with the rest of your tax return. In 2020, you can claim tax donations under £300 without having to itemize. But hopefully, the new bill will expand this to up to one-third of your adjusted gross income. 

Itemizing your tax isn’t easy or quick. It might be easier to just take the standard tax deduction. Make sure your standard tax deduction is less than the sum of your itemized deductions. Otherwise, it may not be worth it.

Essential Things to Remember About Tax-Deductible Donations

To rightly claim for tax-deductible donations, you must meet the specific requirements. Failure to do so will stop you from reclaiming the cash. 

  1. Remember to donate to a qualifying organization. Your donation must go to a tax-exempt organization. This is defined in section 501(c)(3) of the Internal Revenue Code.
  2. Not all organizations need 501(c)(3) status to be deemed a nonprofit organization. Double-check before you donate.
  3. Use the IRS Exempt Organizations Tool to check the charity first. This is an easy way to quickly check that your charity is tax-deductible.
  4. Always check with the charity how much of your donation will be tax-deductible before making the donation.
  5. Keep track of your contributions. No matter how much you donate, keep track of each donation, the details of the charity, the amount, the date, and tax-deductible. Keep hold of any qualifying documents and evidence of the donation, including receipt. 
  6. Any donation above $250 will need a letter of acknowledgment from the charity for proof for the IRS at the end of the year.
  7. You can also deduct your time and expenses from volunteering. Don’t miss out on these tax deductions. As long as your expenses are directly linked to your volunteer work and not previously reimbursed you can qualify for deductions.
  8. You can also claim mileage used to drive to charitable events or fundraisers. In 2020, mileage is 14 cents per mile when used in the service of charitable organizations or events.

Final Thoughts

The new bill that seeks to expand the tax break for charitable donations is positive for charities and individuals in the USA. It should help to incentivize people to give more at this time of need and help those individuals lower the cost of charitable giving by the amount of taxes saved.

We welcome the new bill that is set to be introduced, and we hope this article will help you make better donations to your favorite charities (including FFL) in 2020. The world is in chaos right now, and those charities and organizations need your support to continue their excellent work despite the economic downturn and pandemic.

Thank you in advance for any support you can give to FFL and our hardworking team.

You Can Help!

Support the important work of Food for Life Global to serve its international network of over 200 affiliates in 60 countries.
Food for Life Global is a 501(c) (3) charitable organization, EIN 36-4887167. All donations are deemed tax-deductible absent any limitations on deductibility applicable to a particular taxpayer. No goods or services were provided in exchange for your contribution.

Food For Life Global’s primary mission is to bring about peace and prosperity in the world through the liberal distribution of pure plant-based meals prepared with loving intention.

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