What rules apply to the above-the-line charitable deduction?

Question of the week: What rules apply to the new $300 above-the-line charitable deduction? Do you have to keep records? Are clothing donations eligible?

April 09, 2020

Q. What recordkeeping rules apply to the new $300 above-the-line charitable deduction?

We’ve received many questions about the new $300 deduction for donations to charities. Do taxpayers still have to keep records of donations or have the rules been relaxed? Can donations of clothing be used for this deduction?

A. The same substantiation rules that apply to the itemized deduction for charitable contributions apply to the above-the-line charitable deduction.

The CARES Act introduced a new opportunity for individual taxpayers to deduct charitable contributions without having to itemize deductions. In tax year 2020, individual taxpayers may deduct up to $300 in cash contributions to qualified organizations as an adjustment to income.

Donations of clothing, household goods, etc. are not eligible for the new above-the-line deduction; these items can be included only as itemized deductions on Schedule A. For the above-the-line deduction, donations may only be in cash, including cash, check, credit and debit cards, online transfers, and payroll deductions.

The same recordkeeping requirements that apply to itemized deductions for charitable contributions apply to the above-the-line deduction:

  • Contributions under $250 require either a bank record, such as a cancelled check or credit card statement, or written receipt from the charity showing the organization’s name and the date and time of the donation.
  • Contributions of $250 or more require a contemporaneous written acknowledgment from the charity.
    • “Contemporaneous” generally means that the taxpayer has received the written acknowledgment before filing the return.
    • The acknowledgment must include the amount of the donation and whether any goods or services were received and, if so, the value of the goods or services.
      • If the acknowledgment doesn’t include the date of the donation, the taxpayer should keep a bank record or receipt as substantiation.

Separate contributions to the same charity do not have to be combined for the $250 threshold. For instance, if a taxpayer donates $200 to a charity in April and donates another $100 to the same charity in October, only bank records or receipts are required. On the other hand, if the taxpayer makes a single donation of $300 to the charity a contemporaneous written acknowledgment is required.

There is no carryover of unused deductions. If the taxpayer donates $400 to the charity, whether as a single donation or in multiple donations, only $300 is deductible above-the-line.

See “cash contributions” on page 20 in IRS Pub. 526, Charitable Contributions. We expect the IRS to provide more guidance on the $300 limitation.

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