Giving to worthy causes has never been more important than now, and with the "Black Lives Matter" (opens in new tab) movement sweeping the nation, your generosity in supporting the nonprofits you agree with can help make a difference. Or, donating to those working on the front lines or to the COVID-19 Relief Fund (opens new tab) is an important step toward stopping the virus that has claimed so many lives. Either way, dedicating a portion of your income to charity, if possible, is a great way to make an impact on the issues that matter most. It can also be tax-deductible.

When you donate money to charity, that money is usually tax deductible. In a very basic sense, this means that the amount you donate is deducted from your taxable income to some degree. Consider a very basic scenario: if you earn $50,000 per year and donate $1,000 to charity, you would theoretically only have to pay taxes on $49,000. To do so, the charity you donate to must be IRS-qualified, generally a 501(c)(3) organization. Typically, the nonprofit's website will state whether it meets the criteria.

After making a donation, keep the receipt. To submit a charitable contribution for deduction, you must itemize the donation on a dedicated section of the form called the Schedule A form (aka 1040 or 1040-SR). On this form, you will list the various items you paid for during the year, such as medical and dental expenses, state and local taxes, and interest on mortgages, loans, etc. The total of the form (i.e., the sum of deductions in all of the above areas) is the amount for which you are eligible for a tax deduction.

However, there is a problem: anyone filing a tax return qualifies for the standard deduction, which is the amount deducted from income before income taxes are assessed. The amount of this standard deduction varies depending on marital and household status. For example, if you are single and filing a tax return in 2020, the standard deduction is $12,400, and $12,400 is automatically deducted from your income (and taxed on the rest of your income). Unless your Schedule A total exceeds the standard deduction (i.e., the total is greater than $12,401 (which is not possible if you are early in your career and do not own a home)), you will not receive an additional deduction for your charitable contributions. Think of the standard deduction as a blanket, automatic deduction as long as you don't exceed that figure.

Beginning in 2020, a new initiative is actually being introduced, enacted by the CARES Act (The Coronavirus Aid, Relief, and Economic Security Act), which allows $300 worth Donations of up to $300 are eligible for a deduction called "Above the Line". What this means is that if you make a donation to a charity within 2020 under the criteria I discussed above (in the example above, the total deduction will not exceed $12,400), you can deduct an additional $300 as a donation deduction. This means, for example, that if you donate $600, you would receive a $300 deduction from your taxable income, regardless of whether you met the standard criteria. This law is intended to encourage people to donate when possible and to help those organizations most in need of funds.

Feeling generous' If you have the resources and can make a large donation (again, exceeding the total standard deduction), you can take a charitable deduction of up to 50% of your income (simple example: a single person with an income of $100,000 whose Schedule A total is $12,. 400 exceeds $400, under normal circumstances (subject to certain limitations), he/she may write off $50,000 worth of contributions). If your charitable contributions exceed the limit (good luck with that), you can usually deduct them on your tax return for the next five years, using a method called carryover.

It is important to make donations for important causes. Even if your donation does not affect your tax return through the standard deduction, you are still impacting the lives and movements of people around the world. That is irreplaceable.