Many of us these days are less concerned about ourselves and more concerned about the ways that our family, friends and others are coping with the effects of the COVID-19 pandemic. That general …
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Many of us these days are less concerned about ourselves and more concerned about the ways that our family, friends and others are coping with the effects of the COVID-19 pandemic. That general attitude is part of what makes Westminster, Arvada and neighboring towns such great places to live. To the degree we are able, we try to help those in the greatest need.
We are all aware of family and friends who have lost jobs, who may close their businesses, who struggled with bureaucracy and systems they never dreamed they would deal with - quarantine, school closures, unemployment. How can we help?
And, if we help, it’s fair to ask, will any of our giving qualify as a charitable contribution when we file our tax returns next year?
In short: It depends. Congress and the federal government have responded to the COVID-19 pandemic by allowing a maximum $300 charitable deduction above the line (in other words, you get the standard deduction AND up to $300). The government has also lifted the restriction for qualified charitable gifting deductions to 100% of your adjusted gross income, up from 60%, for 2020. To be a “qualified contribution,” it must be made in CASH (or check or credit card - in other words, not non-cash such as an automobile) to organizations such as public schools, or those designated as 501(c)(3). Go to IRS.gov for a full description of qualifying organizations.
It’s important to note, you cannot deduct donations that you make to an individual. Nor to a “Go Fund Me.” And — for those of you who may be a bit more sophisticated in this area - not for 503(a)(3) organizations (you have to check with the organization) and NOT to donor-advised funds.
Further, contributions to a charitable remainder trust are generally not “qualified contributions” unless the charitable remainder interest is paid to an eligible charity during 2020.
Organization versus individuals
In a tax court case a couple of years ago, parishioners of a church tried to assist their pastor with large, unexpected medical bills. One parishioner tried to claim it as a charitable contribution, and we can agree it was certainly within the spirit of how things should work. But the court ruled that if he wanted a tax deduction, he would have had to donate directly to the church, NOT the individual.
So, here are the rules effective for all cash, check, or credit card charge contributions: we must obtain and keep a bank record or a written communication from the charity as a record of the contribution. Written records personally prepared (such as check registers or personal notations) are no longer sufficient, and the records must show date paid, name of the charity, and amount of the payment. There are additional bookkeeping (and other) requirements for deductions of more than $250 and of more than $5,000. Check with your accountant if you need those details, or if you’re just not sure whether your donation qualifies for a tax deduction.
Bottom line: Don’t let these nuances in the tax law prevent you from acting on your spirit of generosity and helpfulness in these difficult times. But be sure to treat yourself right whenever you can, too.
Fran Coet is a partner in the accounting firm of ATLAS CPAs and Advisors in Westminster, www.AtlasCPAs.com.
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