How COVID Will Change Your Tax Return

SMITH BRAIN TRUST – March of 2020 wasn’t full of good stuff, but it did bring us one good thing – the CARES Act, which among other niceties allows taxpayers to take a “one-time” $300 charitable donation on their 2020 returns, even if they don’t itemize their deductions. 

“That was good news. Even better news is that in recent legislation Congress extended the break where taxpayers can use that ‘one-time’ 2020 deduction again in 2021 – and married couples, filing jointly, can get a $600 deduction break,” says Samuel Handwerger, CPA and full-time accounting lecturer at Maryland Smith. “But this will only apply for the 2021 tax year.”

Or so the law says now, he adds. As that may yet change.

“Here’s a prediction,” Handwerger says. “Once a tax break is allowed, it rarely goes away. Look for this charitable donation allowance for standard deduction filers to become permanent in the law in the near future.”

After all, the deduction doesn’t benefit taxpayers alone, it also benefits charitable groups. “Due to the pandemic, charitable organizations have been struggling in their efforts to help people who have been severely impacted by COVID-19, and they need all the help they can get, ” Handwerger comments. “Having a charitable deduction line without the need to itemize on a tax return is in every charity’s prayers these days."

With the sustantially increased standard deduction taking effect in 2018, close to 87% of taxpayers opted not to itemize in 2019 – reducing the tax incentive for making charitable gifts. 

What’s the fine print? 

“Now, before we get too excited, let me describe to you what a charitable donation for this $300 deduction line looks like,” Handwerger says. It doesn’t apply to the clothes, books and CDs you dropped off at Salvation Army during those heady, springtime Marie Kondo days of lockdown. “It also does not include purchases of those yummy Girl Scout cookies, which went online in 2020 because of the lockdowns. 

"This $300 deduction only applies to cash donations.” 

Handwerger’s advice: Make sure the organizations you give money to are qualified charitable organizations; donate with cash, checks, credit card or debit cards; and keep your receipts.