by Maurie Backman | April 6, 2020
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You may qualify for more of a tax break by being generous this year.
The COVID-19 outbreak has turned the country -- and world -- upside side down. And while many Americans have seen their income slashed as a result of the crisis, others are, thankfully, able to retain their paychecks by doing their jobs full-time from home. If you're in the latter camp, then it pays to be as generous as you can with your earnings -- namely, by helping others secure the supplies they need and donating to charity to the greatest extent possible. Thankfully, the latter just got a lot easier from a tax perspective.
Most people give money to charity out of the goodness of their hearts. But there are tax incentives to be reaped by being charitable, too.
Normally, if you itemize on your tax return, you can deduct donations to registered charities up to 60% of your adjusted gross income. However, if you don't itemize on your tax return, but rather, claim the standard deduction, you don't get to deduct any charitable contributions you made during the year.
The recently implemented CARES (Coronavirus Aid, Relief, and Economic Security) Act changes that, though. Even if you claim the standard deduction on your 2020 taxes (which are due in 2021), you can now take a deduction of up to $300 for monetary donations to a registered charity. Given that the majority of tax-filers go with the standard deduction each year, that's a nice tax break to enjoy -- and one that may make it easier for more people to be generous in the coming weeks, when it's really needed.
Furthermore, charitable contributions equaling up to 100% of your adjusted gross income are now deductible on your 2020 tax return if you itemize on it. Of course, most people can't afford to part with 100% of their earnings, but wealthier Americans or those with hefty savings will now have an easier time stepping up for good causes in the coming weeks and months.
Being charitable is a nice thing to do right now, given the number of people who are struggling throughout the COVID-19 ordeal. If you're eager to be more generous in the coming weeks or months, take a close look at your budget and see what you can comfortably afford. Keep in mind that noble as it is to want to help, you should not be tempted to tap your emergency fund to ramp up your donations. On the other hand, if your paycheck leaves you with $100 left over each month after your essentials are paid for, and you'd normally spend that $100 on restaurant meals and entertainment, you might consider spending $50 on yourself and donating the other $50.
Remember, too, that you can be charitable without actually giving money away. If your income has taken a hit recently, volunteer your time. Check in on the people you care about, and if you're hitting the stores to buy essentials, offer to pick up food for an elderly neighbor who may not feel comfortable venturing out. And if you know someone who's ill from COVID-19, see if that person needs you to pick up medications (which you can safely drop at his or her door without making contact).
Being generous during a period of crisis could change your outlook for the better. The fact that you may now get a tax break out of it just sweetens the deal.
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