As you start to gather your 2021 tax documents, you may be wondering what you need to support your contributions and what type of deductions you will receive because of your charitable giving.
What documentation is required?
The IRS generally requires that you obtain contemporaneous written acknowledgment from the charity stating the amount of your cash donation. When donating property, the written acknowledgment must describe the property, but the charity isn’t required to provide a value. It’s up to you as the donor to determine the property’s value. And, if you donate property valued at over $5,000, you must also get a written appraisal of the property from a qualified appraiser.
“Contemporaneous” means that you need to have the written documentation by the earlier of the date you file your tax return or the extended due date. So, if you donated in 2021 but haven’t yet received any documentation from the charity, it’s not too late — if you haven’t already filed your 2021 return.
If you made a cash donation of under $250 using a check or credit card, generally a canceled check, bank statement or credit card statement will be considered sufficient documentation. If the donation was $250 or more, you should contact the charity and request a written acknowledgment.
If you received something in return for the cash donation, you generally must reduce your charitable deduction by the value of the item received. The charity is required to provide you with the value in the written acknowledgment if the donation was $250 or more.
What happens if I don’t itemize?
Previously, taxpayers who didn’t itemize their deductions (and instead claimed the standard deduction) couldn’t claim a charitable deduction. With the passage of the CARES Act in 2020, individuals who didn’t itemize deductions could still claim a federal income tax write-off for up to $300 of cash contributions to IRS-approved charities for the 2020 tax year. The $300 limit applied to single filers as well as married couples filing joint returns.
Good news! The Consolidated Appropriations Act that was passed in 2021 extended this and doubled the deduction limit to $600 for married couples filing a joint return in 2021. For single filers and married couples filing separate, the deduction limit is $300.
Are there any limitations on how much I can deduct if I itemize?
For 2021, you may elect to deduct qualified charitable contributions up to 100% of your adjusted gross income (AGI). Qualified contributions are cash contributions made to qualifying charitable organizations. Non-cash contributions and gifts to non-qualifying organizations (including private non-operating foundations, supporting organizations, donor-advised funds, and other charitable organizations that do not qualify as public charities) continue to be capped at 20% to 50% of the taxpayer’s AGI depending on the type of property and tax status of the donor organization. Excess contributions over the limitation may be carried forward for up to 5 years.
For 2022 charitable giving, cash contribution limitations will revert to 60% AGI.
What do I do if I still have questions?
As always, reach out to your ATKG advisor who can help you with all your charitable contribution substantiation and deduction questions.
Julie Spurlock is a Tax Senior with ATKG and a Certified Public Accountant. She received her undergraduate degree from St. Mary’s University and a master’s from the University of Texas at Austin. She was named a 2017-2018 Holbrook Scholar by UT and received the 2016-2017 Accounting Excellence Award from the Texas Society of CPAs.
Thomson Reuters resources were utilized in the development of this article.