2021 Charitable Giving Tax Incentives
2021 Tax Incentives-Charitable Giving
Congress has provided several economic incentives to help address the far-reaching effects of the COVID-19 pandemic, including additional tax incentives to encourage charitable giving.
These incentives are temporary and are scheduled to expire at the end of 2021.
Donors Who Itemize
Donors may deduct cash contributions to a nonprofit to offset up to 100% of their income. Ordinarily, the income tax charitable deduction for cash gifts is limited to 60% of income. This 100% limit allows donors to reduce their federal income tax to zero. If a donor wants to donate more than 100% of their income, they can carry forward unused cash contribution deductions for up to five years.
This time-limited benefit only applies to public charities. It is not applicable to gifts to donor-advised funds (DAF) or supporting organizations.
Donors Who Take the Standard Deduction
Donors who do not itemize their deductions can reduce their taxable income by up to $300 (or $600 for married couples filing jointly) in 2021 for contributions of cash to public charities.
Donors 70 ½ years and older
Qualified charitable distributions (QCD) from an IRA is still a great way to make contributions if a person is 70½ or older. Many donors may find the IRA QCD a tax-wise option beginning at age 70 ½, though (as of January 1, 2020) required minimum distributions are not required until age 72.
Because each donor’s situation is different, seek professional legal, estate planning, and financial advice before deciding on a course of action. This information does not constitute legal or financial advice and should not be relied upon as a substitute for professional advice.