Did you throw some goodwill toward a school last year? Don't forget about that donation when the time comes to file your 2020 taxes in 2021. You might want to become familiar with how tax-deductible donations to schools are treated in light of recent tax changes.
In March of 2020, the CARES Act introduced changes that encourage charitable giving. As a result, changes to the IRS code may impact your 2020 tax return.
What's New for Charitable Donations to Schools in 2020
You may recall that charitable donations didn't really impact your tax return unless you were itemizing all of your deductions in previous years. If your itemized deductions were less than the standard deduction, it didn't make sense to bother claiming your charitable deductions. However, the CARES Act put new rules in place that make it possible for people who claim the standard deduction to also claim extra deductions for charitable giving.
Read More: How to Donate a Bed to Charity
Yes, people who take the standard deduction for 2020 can still deduct charitable giving for the first time in years. If you take the standard deduction on your 2020 tax return, you can take advantage of a newly introduced above-the-line deduction for up to $300 in cash donations made to charitable organizations. If you gave to a school this year, get out those receipts to add the total to your deduction.
Waiver of the AGI Limit for People Who Choose Itemized Deductions
If you typically take standard deductions, you may be aware of the fact that the amount you can deduct for charitable contributions is limited to 60 percent of your adjusted gross income (AGI). The CARES Act waives this limit. For 2020 tax returns, the new limit is 100 percent of your AGI for all of your charitable contributions for the year. Any contributions that you make in excess of the giving limit for the year can be rolled over for up to five years.
Read More: Donation Limits When Filing Federal Taxes
Changes for Businesses That Give to Schools
Don't forget to itemize giving on your business return. If you gave to a school on behalf of your business in 2020, the CARES Act also delivers some changes for how you'll handle this donation on your business return. The limit for eligible charitable contributions for 2020 has been raised from 10 percent of your company's taxable income to 25 percent of its taxable income.
Some of the Same Rules Still Apply
While the CARES Act made giving more beneficial for people in 2020, many of the same basic rules for giving charitable contributions still apply. For instance, you aren't permitted to deduct money that you've given to a charity that provided you with a personal benefit. An example would be purchasing a cheesecake at a school bake sale to raise money for a new football field. While the funds for the cheesecake you purchased are technically going to a good cause, this doesn't qualify as a deductible amount because you technically participated in a commercial exchange.
You also can't claim tuition paid to a school as a charitable contribution because you are paying for services rendered. This applies even if you're covering tuition for a child who is not your own out of the kindness of your heart. You also cannot deduct the value of any gifts that you donate to teachers or school employees.
Final Thoughts on Tax-Deductible Donations to Schools for Your 2020 Taxes
If you give to charities consistently, it's important to know that your contributions will be handled differently when you file your 2020 taxes in 2021. The CARES Act allows you to enjoy more tax benefits from your giving than you received in 2019. The biggest change from 2019 taxes is that even people who choose the standard deduction are still permitted to benefit from their charitable giving this time around.
Read More: Tax Deadlines in 2021 for 2020 Tax Year
- Treasury.gov: The Treasury Department is Delivering COVID-19 Relief for All Americans
- IRS: Special $300 Tax Deduction Helps Most People Give To Charity This Year – Even if They Don’t Itemize
- Internal Revenue Service. "Charitable Organizations - Substantiation and Disclosure Requirements." Accessed Mar. 21, 2020.
- Internal Revenue Service. "Know these Facts Before Deducting a Charitable Donation." Accessed Mar. 21, 2020.
- Internal Revenue Service. "Charitable Contribution Deductions." Accessed Mar. 21, 2020.
Adam Luehrs is a writer during the day and a voracious reader at night. He focuses mostly on finance writing and has a passion for real estate, credit card deals, and investing.