By Marcia Mantell, RMA
When you make cash donations in 2021 to most charitable organizations, you’re likely eligible for an extra tax deduction. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended a special deduction for charitable giving. But that opportunity closes on December 31, 2021, as we ring in the New Year.
And, you don’t have to itemize your taxes for 2021 to get the deduction. You can use the standard deduction and still snap up the extra tax deduction for 2021. On the December 9th release of the 2021 IRS Form 1040, you’ll find the additional deduction for charitable contributions on Line 12b. Make sure to reference the 1040 instructions for details on eligible cash contributions.
The deduction amounts are meaningful:
- Single filers, heads-of-households, and qualifying widows(ers) who use the standard deduction can also deduct up to $300 on their federal tax returns.
- If married, filing jointly, and using the standard deduction, $600 can be deducted.
- When married filing separately, you can deduct $150.
- For those itemizing, there is a higher limit on charitable donations. In 2021, the eligible amount of cash donations considered is up to 100% of AGI.
And, with all the excellent choices out there that need your support, it can be quite challenging to narrow down the choices.
12 Tips for Choosing Your Charities
In the spirit of the 12 days of Christmas, here are 12 tips that might help you focus in on the kinds of charities you’d like to support. Assuming you have limited dollars to give, choose one or two tips that most resonate with you personally. Then focus your charitable giving in that direction.
Before you send any money to any charity, make sure to vet them. Use CharityNavigator.org to research the charities you are considering.
- Give for maximum impact to individuals. Check out GiveWell’s site for their top charities based on in-depth analysis. They weigh high impact with low-cost opportunities that save millions of children around the globe.
- Support local to better your own community. You may prefer to strengthen your own town or neighborhood. Ask your librarians for nonprofits in your area, google your town’s nonprofits, or check NonProfitList.org to find a partial list of charitable groups by state and town.
- Connect with international organizations for global meaning. If you traveled to less fortunate areas of the world on a service project or hosted international students through AFS, you may want to stay connected where you already have a personal connection.
- Move society forward. Especially after the social justice marches in 2020, many people have harnessed their energy in movements for a better society for all. Whether you want to support social justice, girls, the underserved, minorities, women, etc., there are charities looking for your donations and your time.
- Remember loved ones who have lost their fight. Contributing in memory of someone you lost to cancer, Alzheimer’s, suicide, etc., is a highly personal way to give. Your hard-earned dollars support research and services in critical areas and help fill that hole in your heart.
- Protect culture and arts organizations. Did your art or music teacher make all difference to you in high school? Do you hang your children’s or grandchildren’s art on the fridge? Funding a museum, orchestra, or local music program may be a way you help others feel the magic.
- Provide for those who need a hand. Too many veterans struggle, too many children don’t get the best chances possible. Our elderly should be revered and animals cared for. Many nonprofits work hard to provide dignity and support to those who need a helping hand.
- Consider a religious tithe. Offerings during services or toward a house of worship’s efforts may be an important way to support your beliefs and the greater good, both locally and internationally.
- Support disaster relief efforts. When natural disasters wreak havoc and destroy communities, wildlife, or forests, there is an immediate need for cash donations. This may be a part of your giving strategy to build in.
- Direct your outrage to make a difference. If you find yourself saying, “This has to stop!” you might support the fight against food insecurity or homelessness in America. Or against cruelty to animals or injustices. Put your money toward solving problems that make you mad.
- Concentrate family giving for bigger impact. If you feel your contribution is but a drop in the ocean, try pooling together family resources. Perhaps you all chip in to support one main cause. Or rotate each year to support a cause important to each family member. There’s power in numbers.
- Cheer on your friends and give to their cause. Any friend or family member willing to run a 26.2-mile marathon or bike 200 miles in support of a cause could use your support. Consider part of your charitable dollars to give to causes important to those important to you.
Are People Donating During the Ongoing Pandemic?
Yes, they are. It was a surprise to find that charitable giving in the US reached an all-time high in 2020. During the first year of the COVID-19 global pandemic. With unemployment soaring. And, with the standard deduction nearly doubled as of 2019, about 90% of tax filers can streamline (not itemize) their tax returns.
In fact, charitable giving numbers skyrocketed from $448 billion in 2019 to $471 billion in 2020, as reported by Giving USA in their 2021 report. About 70% of donations came directly from individuals. Foundations, bequests, and corporate giving made up the rest.
When looking at broad categories of charitable organizations, most saw increases in donations. Public-society organizations, human services, and environmental and animal groups got a boost in donations. Health nonprofits and the arts and culture organizations lost some ground, likely due to cancelled galas, exhibits, and other in-person events that are the drivers of their fundraising.
Around the globe there are more than 10 million nonprofits and non-governmental organizations. In the US, there are between 1.3 and 1.5 million such organizations.
These organizations typically fall under section 501(c) of the IRS tax code and meet the terms for preferential income tax treatment. They also take donations in forms where both donor and receiving charity benefit.
The giver gets a tax benefit, especially when donations are in cash, appreciated securities, or when contributing to a donor advised fund. However, the extra tax deduction for 2021is generally available only on cash contributions.
If you itemize deductions, selected goods also can be given where there is a benefit on both sides: donating your old car, buying bags of groceries for the local food pantry, or big teddy bears and toys for Toys for Tots. Proper documentation for any goods you donate is key to getting any tax benefit.
Besides doing good for their communities—think about everything from hospitals to disaster relief to supporting the homeless and running animal shelters—the nonprofits in every state employ a large number of workers. Overall, they employ 10% of US workers, coming in third behind the retail and manufacturing sectors.
Is there a target amount to donate?
No. Each person or family decides on an amount that fits into their budget first. Then divvy that amount over the one or more charities they wish to support this year.
People tend to donate to nonprofits that make them feel good. They support individuals who need help today. Or because they are passionate about a cause. Whatever your reason, continue your generosity. Every nonprofit will tell you any amount you contribute makes a difference. If you can make it a recurring, monthly contribution to your credit card or bank account that helps them manage their cash flow better.
And, this year, make your donations or additional donations, by December 31 for a little extra tax deduction. Now that’s in the spirit of the holiday season.
About the author: Marcia Mantell, RMA®
Marcia Mantell is the founder and president of Mantell Retirement Consulting, Inc., a retirement business development, marketing & communications, and education company supporting the financial services industry, advisors, and their clients. She is the author of “What’s the Deal with Retirement Planning for Women?” and “What’s the Deal with Social Security for Women?” and blogs at BoomerRetirementBriefs.com.
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