Tax Moves Worth Considering Before the End of the Year

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Charitable-giving deduction: Part of the Coronavirus Aid, Relief, and Economic Security Act carved out a new deduction of as much as $300 for donors who choose the standard deduction for the 2020 tax year. This is available only if you take the standard deduction, instead of itemizing. Moreover, this deduction will appear on tax returns for 2020 above the line for calculating adjusted gross income, or AGI. That’s important since your adjusted gross income can affect many other tax items, such as how much of your Social Security benefits may be subject to tax.

Watch out for important exceptions. This new break applies to “cash” donations (such as cash, check and credit cards). Gifts of “noncash” items, such as securities or clothing, don’t qualify for this provision, says Ms. Perlman. Also, donations must be made to “qualified” charities. Gifts to donor-advised funds don’t count for this break. (These funds have surged in popularity as a way to make donations and nail down deductions for the current tax year even though you can wait until future years to dole out the gifts.) Carry-over contributions from prior years don’t count either.

Because of vague statutory wording, there has been confusion about whether the $300 limit applies to each return or each person. However, according to a footnote in a publication (JCX-12R-20) by the staff of Congress’s Joint Committee on Taxation, that limit “applies to the tax-filing unit,” not to each person. “Thus, for example, married taxpayers who file a joint return and do not elect to itemize deductions are allowed to deduct up to a total of $300 in qualified charitable contributions on the joint return.” The publication says this “above-the-line” deduction is scheduled to expire at the end of this year.

Charitable groups have urged lawmakers to do more, and legislation has been proposed to increase the amount. The $300 is “a critically important first step in recognition of the need but insufficient for the size of the financial crisis nonprofits face,” says Jeff Moore, chief strategy officer at Independent Sector, a national organization representing nonprofits, foundations and corporate-giving programs. “More clearly needs to be done.”

Be sure to get proper receipts for donations. For more details, see IRS Publication 526.

https://www.wsj.com/articles/tax-moves-worth-considering-before-the-end-of-the-year-11602773100 (subscription)


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I think that will have to be first entered on Schedule 1 - adjustments to income. This is the only way it can affect taxable Social Security payments.