$300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

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arcticpineapplecorp.
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$300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by arcticpineapplecorp. »

just read this:
Certain charitable contributions deductible by nonitemizers: The bill extends and modifies the $300 charitable deduction for nonitemizers for 2021 and increases the maximum amount that may be deducted to $600 for married couples filing jointly. However, the Sec. 6662 penalty is increased from 20% to 50% of the underpayment for taxpayers who overstate this deduction.

source: https://www.journalofaccountancy.com/ne ... ility.html
thought I'd pass it along.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by tomsense76 »

It's worth noting there is a similar deduction for 2020 as well. IIRC this needs to be in cash to count, but I could misremembering things.

https://www.irs.gov/newsroom/special-30 ... nt-itemize
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by arcticpineapplecorp. »

tomsense76 wrote: Mon Dec 28, 2020 2:10 pm It's worth noting there is a similar deduction for 2020 as well. IIRC this needs to be in cash to count, but I could misremembering things.

https://www.irs.gov/newsroom/special-30 ... nt-itemize
good point, in that you can still make a deduction for 2020 and yes, it does have to be in cash. good points.
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ved
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by ved »

tomsense76 wrote: Mon Dec 28, 2020 2:10 pm It's worth noting there is a similar deduction for 2020 as well. IIRC this needs to be in cash to count, but I could misremembering things.

https://www.irs.gov/newsroom/special-30 ... nt-itemize
Thanks.

But, that irs link says only $300. Doesn't say it is $600 for MFJ.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by stan1 »

ved wrote: Mon Dec 28, 2020 2:20 pm
tomsense76 wrote: Mon Dec 28, 2020 2:10 pm It's worth noting there is a similar deduction for 2020 as well. IIRC this needs to be in cash to count, but I could misremembering things.

https://www.irs.gov/newsroom/special-30 ... nt-itemize
Thanks.

But, that irs link says only $300. Doesn't say it is $600 for MFJ.
The link is for 2020. It is $300 for MFJ and Single. $150 each for MFS.

2021 is $600 MFJ.
ved
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by ved »

stan1 wrote: Mon Dec 28, 2020 2:21 pm
ved wrote: Mon Dec 28, 2020 2:20 pm
tomsense76 wrote: Mon Dec 28, 2020 2:10 pm It's worth noting there is a similar deduction for 2020 as well. IIRC this needs to be in cash to count, but I could misremembering things.

https://www.irs.gov/newsroom/special-30 ... nt-itemize
Thanks.

But, that irs link says only $300. Doesn't say it is $600 for MFJ.
The link is for 2020. It is $300 for MFJ and Single. $150 each for MFS.

2021 is $600 MFJ.
Got it. Thank you
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by Stinky »

stan1 wrote: Mon Dec 28, 2020 2:21 pm
ved wrote: Mon Dec 28, 2020 2:20 pm
tomsense76 wrote: Mon Dec 28, 2020 2:10 pm It's worth noting there is a similar deduction for 2020 as well. IIRC this needs to be in cash to count, but I could misremembering things.

https://www.irs.gov/newsroom/special-30 ... nt-itemize
Thanks.

But, that irs link says only $300. Doesn't say it is $600 for MFJ.
The link is for 2020. It is $300 for MFJ and Single. $150 each for MFS.

2021 is $600 MFJ.
Is the $600 for 2021 only? Or does it apply to 2022 and later?

(I suspect 2021 only, but wanted to ask).
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by jebmke »

I believe the extension is only through tax year 2021. I've only seen this in summaries and not had time to look at the actual legislation.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by tomsense76 »

stan1 wrote: Mon Dec 28, 2020 2:21 pm
ved wrote: Mon Dec 28, 2020 2:20 pm
tomsense76 wrote: Mon Dec 28, 2020 2:10 pm It's worth noting there is a similar deduction for 2020 as well. IIRC this needs to be in cash to count, but I could misremembering things.

https://www.irs.gov/newsroom/special-30 ... nt-itemize
Thanks.

But, that irs link says only $300. Doesn't say it is $600 for MFJ.
The link is for 2020. It is $300 for MFJ and Single. $150 each for MFS.

2021 is $600 MFJ.
Thanks for that detail. Just so I can understand better, where do the married values come from? From the text of the CARES Act in SEC. 2204 I see this...
Charitable contributions.--In the case of taxable
years beginning in 2020, the amount (not to exceed $300) of
qualified charitable contributions made by an eligible
individual during the taxable year.
Admittedly I'm not a lawyer or an accountant. So there are probably subtle things like "eligible individual" that I'm not understanding correctly :D

Are the married amounts something the IRS has written about in their interpretation of the law?
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by teaman »

Thanks for the article. I believe the tax software is going to check for this so hopefully don’t have to remember yet another tax related item.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by pshonore »

I read somewhere (possibly NY Times) that the 2021 version will be a "below the line deduction". That means it will reduce taxable income but not AGI.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by Gill »

pshonore wrote: Mon Dec 28, 2020 3:56 pm I read somewhere (possibly NY Times) that the 2021 version will be a "below the line deduction". That means it will reduce taxable income but not AGI.
That makes no sense. Then it simply becomes an itemized deduction with a much higher limit and useless to 90% of taxpayers.
Gill
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by mlipps »

Gill wrote: Mon Dec 28, 2020 4:02 pm
pshonore wrote: Mon Dec 28, 2020 3:56 pm I read somewhere (possibly NY Times) that the 2021 version will be a "below the line deduction". That means it will reduce taxable income but not AGI.
That makes no sense. Then it simply becomes an itemized deduction with a much higher limit and useless to 90% of taxpayers.
Gill
No, it doesn't. "Above the line" and "below the line" was more logical on the old 1040, but if you look at the draft 2020 form for reference you can see how it is different. (https://www.irs.gov/pub/irs-dft/f1040--dft.pdf)

The 2020 deduction is on line 10b, and therefore reduces AGI in line 11, which is used as a starting point to determine eligibility for most tax credits such as CTC, Savers Credit, etc. Also, at least here in IL, your state tax return starts with your federal AGI for simplicity.

If the deduction is "below the line" in 2021, it will be perhaps line 13b, treated like QBI, such that it reduces taxable income but not AGI. This is still distinct from it being an itemized deduction.

However, a cursory search shows most news outlets still referring to above the line treatment in 2021. I'm sure someone will read the legislative text & clear things up for us soon. :sharebeer
Last edited by mlipps on Mon Dec 28, 2020 4:23 pm, edited 1 time in total.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by prd1982 »

Gill wrote: Mon Dec 28, 2020 4:02 pm
pshonore wrote: Mon Dec 28, 2020 3:56 pm I read somewhere (possibly NY Times) that the 2021 version will be a "below the line deduction". That means it will reduce taxable income but not AGI.
That makes no sense. Then it simply becomes an itemized deduction with a much higher limit and useless to 90% of taxpayers.
Gill
No idea if true, but it would (a) make sense, and (b) still be useful to people who take the standard deduction. Rather than reducing your AGI, it would give you a larger std deduction. For most people, there would not be a difference. But for people who care about the AGI (e.g., IRMAA), it would make the deduction the same as most deductions.

But no idea if actually in the act.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by pshonore »

From the H&R Block Tax Institute:
Provisions affecting individuals in tax year 2021 and beyond

Charitable contributions. The $300 charitable contribution for taxpayers who don’t itemize is extended through 2021. The 2021 credit is $600 for joint filers. It is claimed “below-the-line,” i.e. it reduces taxable income but not adjusted gross income.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by Chip Munk »

tomsense76 wrote: Mon Dec 28, 2020 3:07 pm Are the married amounts something the IRS has written about in their interpretation of the law?
The instructions for Tax Year 2020, Form 1040 are here (currently a draft, dated 12/15/2020): https://www.irs.gov/pub/irs-dft/i1040gi--dft.pdf
Search within the PDF for "line 10b" to find the full set of instructions. Here's an excerpt:

Enter the total amount of your contributions on line 10b. Don't enter more than:
  • $300 if single, head of household, or qualifying widow(er);
  • $300 if married filing jointly; or
  • $150 if married filing separately.
Again, just to be clear, these are the rules for 2020, though technically the document is still a draft. As the OP and others have stated, the new bill increases the amount to $600 for MFJ in 2021 but I've seen several sources claiming it will no longer be above the line in 2021.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by tomsense76 »

Chip Munk wrote: Mon Dec 28, 2020 7:46 pm
tomsense76 wrote: Mon Dec 28, 2020 3:07 pm Are the married amounts something the IRS has written about in their interpretation of the law?
The instructions for Tax Year 2020, Form 1040 are here (currently a draft, dated 12/15/2020): https://www.irs.gov/pub/irs-dft/i1040gi--dft.pdf
Search within the PDF for "line 10b" to find the full set of instructions. Here's an excerpt:

Enter the total amount of your contributions on line 10b. Don't enter more than:
  • $300 if single, head of household, or qualifying widow(er);
  • $300 if married filing jointly; or
  • $150 if married filing separately.
Again, just to be clear, these are the rules for 2020, though technically the document is still a draft. As the OP and others have stated, the new bill increases the amount to $600 for MFJ in 2021 but I've seen several sources claiming it will no longer be above the line in 2021.
Thanks for sharing! :beer
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by bsteiner »

tomsense76 wrote: Mon Dec 28, 2020 3:07 pm ... Just so I can understand better, where do the married values come from? From the text of the CARES Act in SEC. 2204 I see this...
Charitable contributions.--In the case of taxable
years beginning in 2020, the amount (not to exceed $300) of
qualified charitable contributions made by an eligible
individual during the taxable year.
Admittedly I'm not a lawyer or an accountant. So there are probably subtle things like "eligible individual" that I'm not understanding correctly :D

Are the married amounts something the IRS has written about in their interpretation of the law?
The Act isn't clear (at least not to me), but see the Joint Committee on Taxation staff's description of the Act (see footnote 76 on page 22): https://www.jct.gov/publications/2020/jcx-12r-20/.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by FiveK »

mlipps wrote: Mon Dec 28, 2020 4:14 pm ...it will be perhaps line 13b, treated like QBI, such that it reduces taxable income but not AGI. This is still distinct from it being an itemized deduction.
Yes. Considering the 2021 version similar to QBI is a good way to understand it.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by arcticpineapplecorp. »

from kitces.com:
Initially, this deduction was only scheduled to exist for 2020 and was capped at a maximum of $300 for both single and joint filers.

Section 212 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 extends this benefit to 2021 as well. In addition, for 2021 only, it removes the marriage penalty associated with the 2020 version, by allowing joint filers to claim a deduction of up to $600.

source: https://www.kitces.com/blog/coronavirus ... us-checks/
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by FiveK »

arcticpineapplecorp. wrote: Tue Dec 29, 2020 10:37 am from kitces.com:
Initially, this deduction was only scheduled to exist for 2020 and was capped at a maximum of $300 for both single and joint filers.

Section 212 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 extends this benefit to 2021 as well. In addition, for 2021 only, it removes the marriage penalty associated with the 2020 version, by allowing joint filers to claim a deduction of up to $600.

source: https://www.kitces.com/blog/coronavirus ... us-checks/
The author of that article could have chosen better words. Instead of "extends this benefit to 2021" it would have been better to say "provides a similar benefit in 2021." As discussed elsewhere in this thread, the 2021 version will not reduce AGI.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by jebmke »

FiveK wrote: Tue Dec 29, 2020 11:34 am As discussed elsewhere in this thread, the 2021 version will not reduce AGI.
I did not see anything to this effect in Sec 212 of the bill. Is there another section that makes that change?
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by FiveK »

jebmke wrote: Tue Dec 29, 2020 11:51 am
FiveK wrote: Tue Dec 29, 2020 11:34 am As discussed elsewhere in this thread, the 2021 version will not reduce AGI.
I did not see anything to this effect in Sec 212 of the bill. Is there another section that makes that change?
One has to go down to the "Conforming Amendments" part of that section:
(b) CONFORMING AMENDMENTS.
(1) Section 63(b) is amended by striking ‘‘and’’ at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting ‘‘, and’’, and by adding at the end the following new paragraph: ‘‘(4) the deduction provided in section 170(p).’’.
Then see 26 U.S. Code § 63 - Taxable income defined. The new law puts this charitable deduction just after the QBI (section 199A) deduction.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by BrandonBogle »

teaman wrote: Mon Dec 28, 2020 3:19 pm Thanks for the article. I believe the tax software is going to check for this so hopefully don’t have to remember yet another tax related item.
In TurboTax 2020 this is not in the Charitable Deductions section, but in the Misc. Deductions area. So for my preliminary return, I did NOT enter it at the regular screen and later in the interview process, it asked me then. Other software may do this differently.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by jebmke »

FiveK wrote: Tue Dec 29, 2020 12:09 pm
jebmke wrote: Tue Dec 29, 2020 11:51 am
FiveK wrote: Tue Dec 29, 2020 11:34 am As discussed elsewhere in this thread, the 2021 version will not reduce AGI.
I did not see anything to this effect in Sec 212 of the bill. Is there another section that makes that change?
One has to go down to the "Conforming Amendments" part of that section:
(b) CONFORMING AMENDMENTS.
(1) Section 63(b) is amended by striking ‘‘and’’ at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting ‘‘, and’’, and by adding at the end the following new paragraph: ‘‘(4) the deduction provided in section 170(p).’’.
Then see 26 U.S. Code § 63 - Taxable income defined. The new law puts this charitable deduction just after the QBI (section 199A) deduction.
Thanks; they should have titled the bill "Tax Software Developers Full Employment Act of 2020"
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by Artsdoctor »

Gill wrote: Mon Dec 28, 2020 4:02 pm
pshonore wrote: Mon Dec 28, 2020 3:56 pm I read somewhere (possibly NY Times) that the 2021 version will be a "below the line deduction". That means it will reduce taxable income but not AGI.
That makes no sense. Then it simply becomes an itemized deduction with a much higher limit and useless to 90% of taxpayers.
Gill
I thought the same but it appears that the $600 charitable contribution will have its own line. For those taking the standard deduction ($25,100 in 2021?), you can evidently add the $600 charitable contribution to that number. Don't hold me to it, but that's the way I'm interpreting the opportunity.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by pshonore »

Hot off the press from HRB:
The most recent draft of Form 1040 instructions has a change to the maximum 2020 above-the-line deduction charitable contribution deduction under the CARES Act for married filing separate (MFS) filers. The maximum deduction is $150 rather than $300 as indicated in the previous instructions. The maximum deduction is $300 for all other filers, including joint filers. Note that under the Consolidated Appropriations Act, the 2021 deduction for non-itemizers is a below-the-line deduction of $600 for joint filers and $300 for all other filers.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by GTBuzz »

I am filing a return for my child due to having enough unearned income in UTMA/UGMA accounts, and the child is being claimed as a dependent on my return. Does anyone know if the child is eligible for this $300 charitable deduction, in addition to the $300 I'm eligible for (MFJ)? I can't find anything definitive that this would be allowed, but the IRS instructions and the CARES Act text don't seem to prohibit it.

It doesn't impact our 2020 filing, but for 2021, could the child pick a charity to support out of funds from their UTMA/UGMA account which would allow them to have an additional $300 in tax-free gains?
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by DinkinFlicka »

GTBuzz wrote: Sat Feb 06, 2021 7:54 pm I am filing a return for my child due to having enough unearned income in UTMA/UGMA accounts, and the child is being claimed as a dependent on my return. Does anyone know if the child is eligible for this $300 charitable deduction, in addition to the $300 I'm eligible for (MFJ)? I can't find anything definitive that this would be allowed, but the IRS instructions and the CARES Act text don't seem to prohibit it.

It doesn't impact our 2020 filing, but for 2021, could the child pick a charity to support out of funds from their UTMA/UGMA account which would allow them to have an additional $300 in tax-free gains?
I don’t know the answer to their eligibility, but in 2020 the donation needed to be a cash donation in case you were thinking of donating appreciated shares from the UGMA/UTMA account.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by afr »

Artsdoctor wrote: Tue Dec 29, 2020 3:55 pm
Gill wrote: Mon Dec 28, 2020 4:02 pm
pshonore wrote: Mon Dec 28, 2020 3:56 pm I read somewhere (possibly NY Times) that the 2021 version will be a "below the line deduction". That means it will reduce taxable income but not AGI.
That makes no sense. Then it simply becomes an itemized deduction with a much higher limit and useless to 90% of taxpayers.
Gill
I thought the same but it appears that the $600 charitable contribution will have its own line. For those taking the standard deduction ($25,100 in 2021?), you can evidently add the $600 charitable contribution to that number. Don't hold me to it, but that's the way I'm interpreting the opportunity.
The way I'm reading it, from a pure tax standpoint is that for those taking the standard deduction, making charitable contributions becomes just a wash.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by FiveK »

afr wrote: Mon Nov 22, 2021 9:26 am The way I'm reading it, from a pure tax standpoint is that for those taking the standard deduction, making charitable contributions becomes just a wash.
How do you define "wash"?
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by neurosphere »

afr wrote: Mon Nov 22, 2021 9:26 am
Artsdoctor wrote: Tue Dec 29, 2020 3:55 pm
Gill wrote: Mon Dec 28, 2020 4:02 pm
pshonore wrote: Mon Dec 28, 2020 3:56 pm I read somewhere (possibly NY Times) that the 2021 version will be a "below the line deduction". That means it will reduce taxable income but not AGI.
That makes no sense. Then it simply becomes an itemized deduction with a much higher limit and useless to 90% of taxpayers.
Gill
I thought the same but it appears that the $600 charitable contribution will have its own line. For those taking the standard deduction ($25,100 in 2021?), you can evidently add the $600 charitable contribution to that number. Don't hold me to it, but that's the way I'm interpreting the opportunity.
The way I'm reading it, from a pure tax standpoint is that for those taking the standard deduction, making charitable contributions becomes just a wash.
What do you mean a "wash". If one takes the standard deduction, and also makes at least $300 (single/MFS) or $600 (MFJ) contribution, taxable income is reduced by $300/$600. If one contributes more than those amounts there is a 5 year carryforward of these contributions (I believe?). Of course, if one makes charitable contributes large enough they can qualify for itemization.
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes" (even in taxable accounts).
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by neurosphere »

The draft of the 2021 1040 lists charitable deductions on line 12b, as essentially an "extra" to the standard deduction (12a).

https://www.irs.gov/pub/irs-dft/f1040--dft.pdf
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by dodecahedron »

neurosphere wrote: Mon Nov 22, 2021 9:59 am If one takes the standard deduction, and also makes at least $300 (single/MFS) or $600 (MFJ) contribution, taxable income is reduced by $300/$600. If one contributes more than those amounts there is a 5 year carryforward of these contributions (I believe?).
I see no IRS authority to support your belief that contributions by non-itemizers in excess of $300/600 will qualify for a 5-year carryover.

This IRS page on charitable deductions specifically states that the 5-year carryover applies to percentage of AGI limitations for various types of itemized charitable deduction, and makes no mention of any carryover provisions for the $300/600 cap for non-itemizers.

Certainly the professional tax software used at VITA sites last year (when a $300 non-itemizer charitable deduction provision first went into effect) did not store a carryover of non-itemized charitable deductions in excess of $300.

Bottom line: if you want a charitable carryover, you need to itemize!
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by afr »

FiveK wrote: Mon Nov 22, 2021 9:52 am
afr wrote: Mon Nov 22, 2021 9:26 am The way I'm reading it, from a pure tax standpoint is that for those taking the standard deduction, making charitable contributions becomes just a wash.
How do you define "wash"?
It kinda equals out. Actually, I suppose it really wouldn't. If I'm MFJ and in the 24% IRS fed tax bracket, take the standard deduction and make up to a $600 charitable contribution, its actually costing me. Again, this is purely from a tax standpoint.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by sailaway »

afr wrote: Mon Nov 22, 2021 10:30 am
FiveK wrote: Mon Nov 22, 2021 9:52 am
afr wrote: Mon Nov 22, 2021 9:26 am The way I'm reading it, from a pure tax standpoint is that for those taking the standard deduction, making charitable contributions becomes just a wash.
How do you define "wash"?
It kinda equals out. Actually, I suppose it really wouldn't. If I'm MFJ and in the 24% IRS fed tax bracket, take the standard deduction and make up to a $600 charitable contribution, its actually costing me. Again, this is purely from a tax standpoint.
Now I am more confused. Unless you are saying you don't normally donate up to $600? How is it costing you in taxes, though?!?
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by neurosphere »

dodecahedron wrote: Mon Nov 22, 2021 10:23 am
I see no IRS authority to support your belief that contributions by non-itemizers in excess of $300/600 will qualify for a 5-year carryover....

Bottom line: if you want a charitable carryover, you need to itemize!
You are very likely correct, and which is why I flagged/qualified that statement. My draft/previous 2021 tax software DOES carries forward any non-itemized cash deduction to 50% limit organizations above $600 (MJF), however. But software can obviously be wrong, especially at this stage. In reviewing various articles about the CARES act and Consolidated Appropriate Act, I also cannot find evidence that non-itemizers can have a carryforward of charitable contributions.

EDIT: Never mind regarding the software. I had not entered any income, so AGI was zero, so it was applying an AGI limitation to the contribution. Once I entered sufficient income, the deduction persisted but the carryforward was eliminated. But which raises an interesting (rare/unlikely/contrived) situation. If one has very low AGI (e.g. so that taxable income is zero) but makes a large charitable contribution, could one elect to itemize and preserve some of the charitable contribution for later possible use? This is mostly a rhetorical question. :)
Last edited by neurosphere on Mon Nov 22, 2021 10:49 am, edited 1 time in total.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by afr »

sailaway wrote: Mon Nov 22, 2021 10:31 am
afr wrote: Mon Nov 22, 2021 10:30 am
FiveK wrote: Mon Nov 22, 2021 9:52 am
afr wrote: Mon Nov 22, 2021 9:26 am The way I'm reading it, from a pure tax standpoint is that for those taking the standard deduction, making charitable contributions becomes just a wash.
How do you define "wash"?
It kinda equals out. Actually, I suppose it really wouldn't. If I'm MFJ and in the 24% IRS fed tax bracket, take the standard deduction and make up to a $600 charitable contribution, its actually costing me. Again, this is purely from a tax standpoint.
Now I am more confused. Unless you are saying you don't normally donate up to $600? How is it costing you in taxes, though?!?
Not costing me in taxes, just out of pocket. I see no real tax benefit for those simply taking the standard deduction to make any charitable contributions.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by neurosphere »

afr wrote: Mon Nov 22, 2021 10:45 am Not costing me in taxes, just out of pocket. I see no real tax benefit for those simply taking the standard deduction to make any charitable contributions.
No one comes out AHEAD* (meaning more money in their pocket) with charitable contributions. But..

If I give $600 to charity without this deduction, the charity has $600 and I don't have it. But with the deduction, the charity as the same $600 but then I also have whatever tax deductions. Thus, between the charity and me, we have more money.

Alternately, suppose I can afford to give $600 to charity. But with the tax deduction, I can now afford to give $600+$X to charity and still only cost me the $600 I could previously afford/desire to give.

NS

* I suspect there are some circumstances where this could happen, with tax non-linearities, cliffs, etc.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by dodecahedron »

neurosphere wrote: Mon Nov 22, 2021 10:53 am
afr wrote: Mon Nov 22, 2021 10:45 am Not costing me in taxes, just out of pocket. I see no real tax benefit for those simply taking the standard deduction to make any charitable contributions.
No one comes out AHEAD* (meaning more money in their pocket) with charitable contributions. But..

[snip]

* I suspect there are some circumstances where this could happen, with tax non-linearities, cliffs, etc.
Yes, a classic example of a cliff where a charitable donation can actually make a person come out ahead (potentially massively ahead) is the NYS estate tax cliff. The particular situation described in the link is elegantly simple to explain. There are many other more involved sets of circumstances where a charitable donation structured in a complex manner also comes out ahead of not giving.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by Chip Munk »

afr wrote: Mon Nov 22, 2021 10:30 am
FiveK wrote: Mon Nov 22, 2021 9:52 am
afr wrote: Mon Nov 22, 2021 9:26 am The way I'm reading it, from a pure tax standpoint is that for those taking the standard deduction, making charitable contributions becomes just a wash.
How do you define "wash"?
It kinda equals out. Actually, I suppose it really wouldn't. If I'm MFJ and in the 24% IRS fed tax bracket, take the standard deduction and make up to a $600 charitable contribution, its actually costing me. Again, this is purely from a tax standpoint.
It works the same as it did back when you itemized your deductions, assuming you were able to do that in the past. If you gave $600 to charity and deducted it on Schedule A, it reduced your taxable income by $600, saving you $150 in taxes assuming you were in the 25% bracket back then. Yes, you were out of pocket $450, but the charity got $600. Great deal!

Since the tax laws changed, it hasn't made sense for DH and I to itemize. We've continued to donate to charity, but we lost the tax break until last year when we were allowed to deduct $300 from our taxable income, and now this year when we can deduct $600. We're in the 22% bracket, so we will reduce our taxable income by $600, saving $132 in taxes. Since I would have donated to charity anyway, I am $132 better off as a result of this provision in the tax law. I would prefer a higher limit so that more of our donations would be deductible, but I'm grateful for the $132 tax savings and for the fact that it just might encourage people who don't itemize to donate to charity who might not otherwise have done so.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by MrJedi »

afr wrote: Mon Nov 22, 2021 10:45 am Not costing me in taxes, just out of pocket. I see no real tax benefit for those simply taking the standard deduction to make any charitable contributions.
Not sure what you mean.

I give charitable donations regardless if I get a deduction or not.

I take standard deduction, and now I get an extra deduction from the donation on top of the standard deduction. This is a tax benefit for me with my normal spending/gifting habits.

Or are you referring to somebody who does not normally give donations?
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by Artsdoctor »

Last year, the small charitable contribution came off the AGI. This year, it'll be added to the standard deduction so your AGI won't be influenced by your donation. But if you decide to make a contribution up to $600 (MFJ), you'll add that to your standard deduction and the contribution will be tax-deductible (as long as it's cash and not appreciated assets or non-cash items).
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by hvaclorax »

My state requires itemized giving. (MT) So, hopefully the software will pick up on this and populate the appropriate fed deduction. I’ll have to verify.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by jebmke »

hvaclorax wrote: Wed Dec 01, 2021 10:15 am My state requires itemized giving. (MT) So, hopefully the software will pick up on this and populate the appropriate fed deduction. I’ll have to verify.
HVAC
Some states start with AGI - I know mine does. Unless there is a specific subtraction allowed, the $600 adjustment will not be taken on the Maryland tax return. I haven't seen the forms for 2021 yet for MD so I don't know if the legislature made any allowance for the move of this adjustment from above-AGI to below AGI.
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Re: $300 charitable deduction for nonitemizers for 2021 and expands to $600 for MFJ

Post by Monster99 »

jebmke wrote: Wed Dec 01, 2021 10:38 am
hvaclorax wrote: Wed Dec 01, 2021 10:15 am My state requires itemized giving. (MT) So, hopefully the software will pick up on this and populate the appropriate fed deduction. I’ll have to verify.
HVAC
Some states start with AGI - I know mine does. Unless there is a specific subtraction allowed, the $600 adjustment will not be taken on the Maryland tax return. I haven't seen the forms for 2021 yet for MD so I don't know if the legislature made any allowance for the move of this adjustment from above-AGI to below AGI.
Indiana state taxes use AGI as a starting point - In 2020 we had to add back the $300 to the AGI because it was "above the line". using it to reduce the tax but not affecting the AGI will simplify my state taxes a bit....
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2021 - $300/$600 Charitable deduction for tax filers who don't itemize still in effect

Post by DoTheMath »

[Title was "Charitable deduction for people taking the standard deduction" --admin LadyGeek]

Since I had to double-check myself, I thought it worth reminding folks that the $300/$600 charitable deduction for people taking the standard deduction is still in force:

https://www.irs.gov/newsroom/expanded-t ... ty-in-2021
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Re: 2021 Charitable deduction for tax filers who itemize still in effect

Post by LadyGeek »

I clarified the thread title.
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Re: 2021 Charitable deduction for tax filers who itemize still in effect

Post by KlangFool »

LadyGeek wrote: Sat Dec 04, 2021 4:22 pm I clarified the thread title.
LadyGeek,

I think the title should be

"2021 - $300/$600 Charitable deduction for tax filers who don't itemize still in effect"

The word: "don't" is missing.

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Last edited by KlangFool on Sun Dec 05, 2021 6:26 am, edited 1 time in total.
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Re: 2021 - $300/$600 Charitable deduction for tax filers who don't itemize still in effect

Post by LadyGeek »

Thanks. I have corrected the title.
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