The emergency disaster declaration made by President Trump on March 13, 2020, made it possible for employees to donate their unused paid vacation time, sick leave, and personal time off to qualified charities that provided COVID-19 relief in 2020.
The IRS recently extended leave donations through 2021. If your employer is participating, this declaration can be an opportunity for you to make donations without costing you out-of-pocket cash.
Here is how it works: if your employer participates, you can relinquish any unused and paid vacation time, sick leave, and 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 in 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 vacation, sick, and leave time and have the cash value donated to a worthy cause.
If you have questions about donating leave time for COVID-19 relief efforts or other charitable contributions, don't hesitate to contact our office.