Make no mistake about it, this pandemic hit a lot of people hard financially. It was especially difficult on families, small businesses, and individuals – but you don’t need us to tell you that.
While there were some special programs and aids provided by the government to help most people and their businesses, one sector remained a little more neglected than others – charity organizations. Congress did very little in order to aid them to keep them running.
When Congress saw this, they realized most people would begin to hoard their money rather than go out and spend it or donate it to their favorite cause. It made sense that in times of uncertainty people became more frugal with their spending, hoping to wait out the pandemic with minimal financial impact.
Congress decided in the CARES Act to add that if you take a standard deduction, you now have the opportunity to also take cash charitable contribution deductions up to $300 without itemizing your return!
What Is An Itemizing?
Most of us are familiar with a standard deduction which is the portion of your income not subject to tax, which can be used to reduce your tax bill (Up to $12,200 for single and up to $24,400 for married couples filing jointly).
An itemized deduction is an expense which can be subtracted from one’s adjusted gross income (AGI). Your adjusted gross income is your income minus certain adjustments the IRS uses to determine your income tax liability for the year.
This allows you to adjust your income by deducting expenses such as:
Thankfully, this new deduction wasn’t only passed for 2020, but was also extended to 2021!
An Important Thing to Note:
You may use one or the other methods of deduction when filing your taxes, but not both.
Speaking with a Sinn accountant can help you learn more about whether itemizing or taking a standard deduction would provide better savings on your taxes. Contact Us Today!
