Who loves IRS aka Uncle Sam? Not many. While Uncle Sam is the only Uncle who loves you prosper and be profitable and earn more year after year (to pay more in taxes). But come COVID-19 and Uncle Sam has relaxed limits on charitable contributions to promote giving to help the needy and those in distress.
For details about Temporary Suspension of Limits on Charitable Contributions , may please visit https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions
Here are some head points:
- “In most cases, the amount of charitable cash contributions taxpayers can deduct on Schedule A as an itemized deduction is limited to a percentage (usually 60 percent) of the taxpayer’s adjusted gross income (AGI). Qualified contributions are not subject to this limitation.
Individuals may deduct qualified contributions of up to 100 percent of their adjusted gross income.
A corporation may deduct qualified contributions of up to 25 percent of its taxable income. Contributions that exceed that amount can carry over to the next tax year.
To qualify, the contribution must be:
- a cash contribution;
- made to a qualifying organization;
- made during the calendar year 2020.”
(What is a Qualifying Organization? While details can be found in section 170(c) of the Internal Revenue Code, “A community chest, corporation, trust, fund, or foundation, organized or created in the United States or its possessions, or under the laws of the United States, any state, the District of Columbia or any possession of the United States, and organized and operated exclusively for charitable, religious, educational, scientific, or literary purposes, or for the prevention of cruelty to children or animals.”)
- “There is a special rule allowing enhanced deductions by businesses for contributions of food inventory for the care of the ill, needy or infants. The amount of charitable contributions of food inventory a business taxpayer can deduct under this rule is limited to a percentage (usually 15 percent) of the taxpayer’s aggregate net income or taxable income. For contributions of food inventory in 2020, business taxpayers may deduct qualified contributions of up to 25 percent of their aggregate net income from all trades or businesses from which the contributions were made or up to 25 percent of their taxable income.”
- “If you donate property other than cash to a qualified organization, you may generally deduct the fair market value of the property. If the property has appreciated in value, however, some adjustments may have to be made.”
- Timing of the Contribution: “Contributions must actually be paid in cash or other property before the close of your tax year to be deductible, whether you use the cash or accrual method.”
And it has been extended to 2021. So, if you missed it in 2020, for 2021, it is the time. (Extension and expansion of the above-the-line charitable deduction https://giving.stanford.edu/stories/cares-act-extension/)
This must interest individuals who don’t itemize deductions (and quite a lot of us don’t):
- The $300 above-the-line charitable deduction has been extended for single filers who do not itemize deductions.
- For 2021, this above-the-line deduction is increased to $600 for married couples filing jointly who do not itemize tax deductions.
- As in 2020, this deduction applies only to qualified cash contributions and does not apply to cash contributions made to private foundations, donor advised funds or supporting organizations, or to split interest trusts like charitable remainder and lead trusts. It also does not apply to carry-over contributions.
On September 7, 1813, the United States gets its nickname, Uncle Sam. The name is linked to Samuel Wilson, a meat packer from Troy, New York, who supplied barrels of beef to the United States Army during the War of 1812. Wilson (1766-1854) stamped the barrels with “U.S.” for United States, but soldiers began referring to the grub as “Uncle Sam’s.” The local newspaper picked up on the story and Uncle Sam eventually gained widespread acceptance as the nickname for—and personification of—the U.S. federal government. www.history.com
Disclaimer: This is neither a tax advice nor recommendation. It is intended as purely informational and educational to help promote giving in these extraordinarily difficult times.