New Mexico Thrives joins IRS to highlight special charitable tax benefit available
SANTA FE – The Internal Revenue Service joined with New Mexico Thrives to highlight a special tax provision that allows more people to deduct donations to qualifying charities on their 2021 federal income tax return.
This pandemic-related provision provides an opportunity for married couples filing jointly to deduct up to $600 in cash donations and individual taxpayers to deduct up to $300 in donations.
Under the temporary law, taxpayers don’t need to itemize deductions on their tax returns to take advantage of this, which creates tax-favorable donation options not normally available to about 90 percent of tax filers. Ordinarily, people who choose to take the standard deduction cannot claim a deduction for their charitable contributions. But this special provision permits them to claim a limited deduction on their 2021 federal income tax returns for cash contributions made to qualifying charitable organizations by year’s end, Dec. 31, 2021.
“Holiday giving is often an annual traditional for many taxpayers,” said David Tucker II, IRS spokesperson. “The IRS and the nonprofit community want everyone to be aware of this special opportunity so they can make their charitable contributions in time for the deadline of December 31, 2021, for their 2021 federal tax return.”
Tsiporah Nephesh of New Mexico Thrives said, “New Mexico’s nonprofits have been on the front lines serving community members throughout the extraordinary challenges of the last two years. Your donations now mean more than ever and will enable nonprofits to continue this vital work in the coming year.”
Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify. Under this provision, tax year 2021 individual tax filers, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions made to qualifying charities during 2021. The maximum deduction is increased to $600 for married individuals filing joint returns.
Cash contributions include those made by check, credit card or debit card as well as amounts incurred by an individual for unreimbursed out-of-pocket expenses in connection with their volunteer services to a qualifying charitable organization. Cash contributions don't include the value of volunteer services, securities, household items or other property.
The IRS reminds taxpayers that to receive a deduction, they must donate to a qualified charity. To check the status of a charity, they can use the IRS Tax Exempt Organization Search tool.
Cash contributions to most charitable organizations qualify for a deduction. But contributions made either to supporting organizations or to establish or maintain a donor advised fund do not. Contributions carried forward from prior years do not qualify, nor do contributions to most private foundations and most cash contributions to charitable remainder trusts.
In general, a donor-advised fund is a fund or account maintained by a charity in which a donor can, because of their donor status, advise the fund on how to distribute or invest amounts contributed by the donor and held in the fund. A supporting organization is a charity that carries out its exempt purposes by supporting other exempt organizations, usually other public charities.
The IRS encourages all donors to be wary of scams masked as charitable solicitations. Criminals create fake charities to take advantage of the public’s generosity. Fake charities once again made the IRS's Dirty Dozen list of tax scams for 2021. In October, the IRS also joined international organizations and other regulators in highlighting the fight against charity fraud.
Keep good records
Special recordkeeping rules apply to any taxpayer claiming a charitable contribution deduction. Usually, this includes obtaining an acknowledgment letter from the charity before filing a return and retaining a cancelled check or credit card receipt for contributions of cash.
For details on the recordkeeping rules for substantiating gifts to charity, see Publication 526, Charitable Contributions, available on IRS.gov.
This article originally appeared on Deming Headlight: NM Thrives joins IRS to highlight charitable tax benefit available
