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IRS, non-profits push $300 charitable tax deduction, set to expire at year-end

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WASHINGTON, Dec 13 (Reuters) - Internal Revenue Service officials and non-profit groups are seeking to drum up awareness for a relatively unheralded benefit of COVID-19 relief legislation - a $300 tax deduction for charitable donations for Americans who do not itemize their tax returns.

The increased deduction limit, which is $600 for married couples, is aimed at sustaining charitable giving during the coronavirus pandemic. It could help provide incentives to increase donations to charities aiding people hit by recent tornadoes and other natural disasters, officials representing non-profit groups said on Monday.

On a conference call with reporters, they noted that 2021 is the last tax year available for the increased deduction limits. The expiring limits also apply to filers who do itemize deductions on their tax returns.

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"The pandemic has created unique challenges for tax-exempt organizations, and we want to make sure people don’t overlook this special tax deduction that's available this year,” said Sunita Lough, IRS commissioner for the Tax Exempt and Government Entities division.

"Donations to qualifying charities can reduce people’s tax bill when they file in 2022."

Republican-passed tax cuts in 2017 doubled the standard deduction to $12,550 for an individual or $25,100 for a married couple. That made it more difficult for Americans to reach a threshold of itemizing deductions and gaining a tax benefit from donations.

Charitable giving by individuals in 2018 fell by 1.1%, according to the Giving USA Foundation.

Overall charitable donations by individuals would have declined in 2020 but for around $6 billion donated last year

by philanthropist MacKenzie Scott, the ex-wife of Amazon.com (AMZN.O) founder Jeff Bezos, to causes ranging from food banks to racial equity groups, non-profit officials say.

"Across the board, we're seeing that, even though the needs are more than we've probably ever experienced, giving has gone down," said David Thompson, vice president of public policy at the National Council of Nonprofits.

At the same time, small-scale donations have been helped by the tax deduction, with a 28% increase in $300 donations - matching the deduction limit for single filers - on the final day of 2020, said Ben Kershaw, director of public policy and government relations at Independent Sector, a membership organization for a diverse array of non-profit groups and foundations.

Charitable groups are pushing for Congress to pass legislation to raise the individual giving deduction to $4,000 and make it permanent. The measure has 13 bipartisan co-sponsors, but was not included in President Joe Biden's sweeping social and climate spending plan.

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Reporting by David Lawder; Editing by Dan Grebler

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