How do cash versus non-cash donations impact the above the line deduction eligibility?
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For tax year 2025 and beyond, under the One Big Beautiful Bill Act (OBBBA), the above-the-line deduction for charitable contributions is expanded and made permanent, allowing taxpayers who do not itemize deductions to claim a limited deduction for charitable contributions. The eligibility and treatment of cash versus non-cash donations for this above-the-line deduction are as follows:
1. Cash Donations:
- Cash contributions are eligible for the above-the-line deduction.
- The maximum deduction is $1,000 for single filers and $2,000 for joint filers per year.
- The deduction applies only to contributions made in cash during the taxable year to organizations described in section 170(b)(1)(A), excluding contributions to supporting organizations under section 509(a)(3) and donor advised funds.
- The deduction is calculated without regard to the 0.5% AGI floor, the 60% AGI limit for cash contributions, and the five-year carryover rules that apply to itemized deductions.
2. Non-Cash Donations:
- Non-cash contributions (such as property, clothing, household items, securities, etc.) are not eligible for the above-the-line deduction.
- Only cash contributions qualify for this deduction; non-cash contributions can only be deducted if the taxpayer itemizes deductions on Schedule A.
3. Additional Requirements:
- The cash contribution must be made to a qualified organization as defined in section 170(b)(1)(A), and not to a supporting organization or donor advised fund.
- Proper substantiation is required: a bank record or written communication from the donee showing the name of the organization, the date, and the amount of the contribution.
4. Summary Table:
5. Conclusion:
Only cash donations are eligible for the above-the-line charitable contribution deduction under current law. Non-cash donations do not qualify for this deduction and can only be claimed if the taxpayer itemizes deductions.
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