As part of the emergency disaster declaration made by President Trump on March 13, 2020, it became possible for employees to donate their unused paid sick, vacation or personal leave to qualified charities that provided COVID-19 relief in 2020.
The IRS recently extended leave donations through 2021. This is a great opportunity to provide sorely needed help in the ongoing COVID-19 pandemic without any cost to you. Check with your employer to see if they are participating and for more information. If your employer is unaware of this program, refer them to IRS Notice 2020-46 and 2021-42.
Here is how it works: if your employer is participating, you can relinquish any unused sick, vacation or personal leave for cash payments which your employer will donate to COVID-19 relief charitable organizations. The cash payment will not be treated as wages to you, and your employer can deduct the amount donated as a business expense. However, since the income isn’t taxable to you, you will not be allowed to claim the donation as a charitable deduction on your tax return. Even so, excluding income is often worth more as tax savings than a potential tax deduction, especially if you generally claim the standard deduction or are subject to AGI-based limitations.
This special relief applies to all donations made before January 1, 2022, giving individuals plenty of time to forgo their unused paid leave and have the cash value donated to a worthy cause.
If you have questions related to donating leave time for COVID-19 relief efforts, or other charitable contributions, please contact our office.