Did you donate any funds aimed at relieving the effects of the pandemic? Maybe you just made some contributions to a local charity on a monthly basis.
The above instances may qualify you for a special tax deduction. Cash donations made before the end of the year 2020 are eligible for a $300 tax deduction.
What do you need to know about this form of tax deduction before filing your tax returns?
What is a tax deduction?
It is a deduction that is meant to lower an individual’s liability by quoting a lesser taxable income figure.
These deductions are usually expenses incurred by the taxpayer during the previous year. To figure out the tax that is owed, the deductions are subtracted from the taxpayer’s gross income.
How to determine if your donations are eligible
The special tax deduction is awarded to individuals who made cash donations of not more than $300. In addition, the funds need to be donated to a qualified organization before the end of the year 2020.
Donations under this spectrum include those made by check, cash, and credit or debit card. If you donated household items, securities or property, the tax deductions do not apply. In essence, any funds donated to a food bank may be claimed, but clothes dropped at Goodwill may not be claimed.
Before going ahead with the claim, ensure that the organization that you donated to was eligible at the time of the charitable transaction. The organization has to be registered with the IRS.
Preserve all documents that show that you made a donation
Hold on to all documents given to you by the organization you made a donation to. If you spend more than $250 in the transaction, you will need a receipt to back your claim.
If you made an online donation, you probably received an email summary. This counts as proof of donation.
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