Do I Get a Tax Break If I Donate My Stimulus Check?
To combat the economic crisis caused by the coronavirus pandemic, the IRS and Treasury Department have sent out two rounds of stimulus checks to support millions of Americans. However, not everyone receiving a stimulus check needs it.
While many people deposit their check into their savings account or indulge in a shopping spree or night out, others may choose to donate theirs to those in need. If you’ve received a stimulus check but don’t need it, donating the money is a great way to give back — and you can get a tax break if done properly. Here’s what you need to know.
How to donate your stimulus check
Spend it on local small businesses in your community
Many local small businesses have been affected by the pandemic. Limited in-person traffic, changing customer needs, and overall fewer resources have made it difficult for smaller shops to stay open. By putting your stimulus check toward a local small business, you can directly impact your local economy and make a significant impact on companies that may be struggling right now.
Donate to those in need who don’t qualify for stimulus checks
Eligibility for stimulus checks is largely determined by income. However, not everyone who falls under a certain income threshold will qualify. Some people, including immigrants and those claimed as dependents, may face financial hardship but not qualify for a stimulus check. If you aren’t using your funds, donating them to those in need can directly improve their financial situation.
Look up credible charities
Charities rely largely on the generosity of donors to support their mission. By making a charitable donation to an organization whose cause matters to you, you can ensure that your funds are going toward the greater good. Before making any payments, do your research to ensure that the charity is credible.
How to get a tax break by donating your stimulus check
Donating your stimulus check is not only a great way to give back to those in need, but you can also get a tax deduction in the process. Here’s how to do it:
Donate to qualified/eligible charities
For your donation to qualify for a tax break, it must go toward an organization that is eligible to receive tax-deductible charitable contributions. You can look up qualifying charities on the IRS’s Tax Exempt Organization Search. Donating money to a family or individual does not qualify for a tax deduction.
Itemize deduction on your return
Generally speaking, you will need to itemize your donation as a deduction on your return to receive a tax break. However, the Coronavirus Aid, Relief, and Economic Security (CARES) Act has established new provisions on charitable giving. Under the CARES Act, you can claim an above-the-line deduction of up to $300 on your tax return for any qualifying organization. These provisions do not apply to contributions to supporting organizations or donor-advised funds.
Provide a record of the donation
Your donation can be made through any means of payment (cash, check, or credit card). However you contribute, you must get a record of the donation. You can ask the organization to provide a receipt, email, or letter that includes the amount and date of your contribution.
Need tax help? Call Miller & Company.
If you’ve donated your stimulus check and aren’t sure how to report it on your taxes, you don’t have to go it alone. Miller & Company’s experienced CPAs can help you file your 2020 tax return and ensure you get the appropriate tax deductions for charitable contributions. Contact us today for a consultation.