Why giving before the year is over is a smart tax move.
As 2021 reaches its end, we are in celebration mode as we look at our successes over the past year and feel a sense of renewed motivation as we approach the coming year. We were able to accomplish a lot over the year, and a lot of the critical work we completed laid the groundwork down for next year. Although 2021 isn’t totally over yet, it’s not too early to think about setting yourself up for success next year, especially regarding tax season.
Rebuilding Together Silicon Valley is a nonprofit with registered 501(c)3 status. This means that when you give a gift to RTSV, it is considered tax deductible and can reduce your taxable income. Usually, gifts to registered 501(c)3 nonprofits must be itemized or tracked in order to subtract expenses from adjusted gross income on your tax bill. Generally, 60% of your adjusted gross income can be deducted through donations (although it is important to note that this percentage can change depending on the type of organization; you can read more about these details from the IRS Publication 526 available here).
Tax Benefits of Giving in 2021
For gifts made in 2021, this rule is slightly different with two major changes: first, The CARES Act, passed by congress in March of 2020, eliminated the limit on only allowing 60% of cash donations to registered 501 (c)3 nonprofits to be able to count towards deductions from your taxable income. Second, you can deduct up to $300 without itemizing deductions.
Last month in November, the IRS reminded taxpayers that a special tax provision will allow deductions up to $600 in donations to nonprofits with 501(c)3 status, like RTSV, if filing taxes jointly. People filing taxes individually, including married individuals filing separate returns, can claim a deduction of up to $300, but you must make a gift to a qualifying nonprofit before December 31st.
Tips To Keep In Mind
Your charitable giving only qualifies to be deducted if you give to a qualifying nonprofit (like Rebuilding Together Silicon Valley). Sometimes nonprofits are not registered with 501(c)3 status, and while giving still helps nonprofits like that change lives, you won’t be able to take deduct gifts made to nonprofits without tax exempt status. The best way to confirm the tax-exempt status of a nonprofit with the IRS Exempt Organizations Search Tool by clicking here. For example, if you are searching by organization name, you can type “Rebuilding Together Silicon Valley” in the IRS Exempt Organizations Search Tool, or if you are searching by EIN, you’ll need to type “77-0289381”.
Another great tip to keep in mind is confirming how much of your gift is tax deductible. When you give to RTSV, you can take pride in knowing that not only are you helping us preserve affordable housing in the worsening Silicon Valley housing crisis, but that 100% of any gift made to RTSV is fully tax deductible.
In addition to confirming the tax-exempt status of a nonprofit and understanding how much of your gift is tax-deductible, it is important to keep track of your tax-deductible donations so that you can provide proper documentation of your contributions when filing your taxes. The proper documentation includes a bank statement, a credit card statement along with a receipt from the nonprofit that includes the date, amount, and name of the nonprofit, or a canceled check. If you made contributions as an automatic deduction through your employer from your paycheck, qualifying documentation includes copies of your W-2 or paystubs that specify the amount of the donation as well as the date it was made.
Additional documentation is needed in 2 circumstances: if you give more than $250 in cash or property donations, or if you plan on deducting more than $500 in non-cash (or in-kind) donations. For cash or property donations higher than $250, the IRS requires a letter of acknowledgement from the nonprofit that includes the amount of cash donated and whether you received anything from the nonprofit in return. The letter of acknowledgment must also be received by the date you file your taxes. On the other hand, for non-cash donations valued at $500 or higher, you’ll need to attach an appraisal of any items donated along with Form 8283 if they are worth more than $5,000.
At Rebuilding Together – Silicon Valley, we believe that everyone deserves to live in a safe and healthy home, so we help provide critical home repairs to over 600 clients per year, including to those who are aging in place. We rely on generous donations to continue our essential work and the positive impact we have in these communities.
Our Work Takes Grit!
and create change firsthand!