Republicans passed the Tax Cuts and Jobs Act in 2017 reshaping the way many Americans pay taxes. Apart from the uninspired, and obvious marketing, based name, the law made some deductions disappear. It tried to fill in those deductions by giving everyone a higher standard deduction. Theoretically, people pay the same or lower taxes and don’t have to itemize to do it, but politics gets in the way of everything in Washington.
Charitable Cash Contributions
One of the things that was originally supposed to go away in the bid to make it so fewer people had to itemize was getting rid of the charitable contributions deduction when you took the standard deduction. But there were howls of terrible things to come, whispers of charities disappearing from the country all together, cats and dogs living together, mass hysteria!
And so, Congress caved and let people who take the standard deduction still take a deduction for some charitable giving.
Line 10b under Adjustments to Income, taxpayers may deduct up to $300 for cash donations. That $300 is the same for filing single or married filing jointly. If you do the married filing separately thing, you have to split it, so each of you can deduct up to $150. Note that the deduction is for cash donations only. You cannot use Line 10b for donations of goods or other non-cash donations.
The $300 is for non-itemizing taxpayers only. So, if you take a standard deduction, you can take the standard deduction plus $300 for your cash contributions to charity. Also, notice that line 10b is above the line, so it reduces your adjusted gross income.
Itemize For Charitable Deductions
What if you donate more than $300 in cash?
What if you donated stuff?
What if you cleaned out your basement and donated household goods to the local Goodwill?
You can still deduct all of it… but you have to itemize.
There it is! Just like old times, on Schedule A.
Like before, you can deduct more than $300 in cash donations, you can deduct stuff other than cash, and so on and so forth. Although it might not add up to enough to be worth it. The standard deduction for 2021 is $25,100 for married filing jointly. You’re going to need plenty of other deductions to get up to $25,000. For most Americans, getting to $25,000 involves deducting their mortgage interest. Even then, only larger mortgages are going to get up to $20,000+ in mortgage interest. Other deductions that might get a taxpayer up to $25K are medical expenses. With the cap on state and local taxes, they might be much help either.
In the end, as always, you should compare your taxes with itemizing and without itemizing and choose the one where you owe less taxes. If you use a program like TurboTax, or the Free Credit Karma tax program, it will do that comparison for you. However, you might want to make a rough guess before you collect and enter all those charitable deductions and mortgage interest if your rough math doesn’t come close to $25,000.