2021 Year-End Giving for Individuals Under the CARES Act

The CARES Act allowed for provisions for individuals to take advantage of tax benefits for charitable giving specific to 2021. Have you made the most of your charitable giving to take advantage of a few changes under the CARES Act? The following will go over a few of the rules of the changes.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. It was designed as relief from the impacts of COVID-19. The CARES Act’s primary focus was economic assistance for American workers and families through various stimulus benefits. Additionally, the CARES Act changed the tax benefits for charitable giving for 2021 with the bill’s extension on December 27, 2020.

The specific type of charitable giving we are referring to is cash donations. These cash donations are given to qualifying charitable organizations such as 501(c)(3) public charities. For other types of non-cash donations of real estate or marketable securities, contributions to donor-advised funds, conservation easement, or private foundations have other limits/restrictions that can apply and will not be addressed in this newsletter.

What are the key provisions that affect 2021 under the CARES Act?

For taxpayers that itemize:

For the first time, donors who itemize their deductions can now deduct charitable contributions up to 100% of adjusted gross income (AGI). This change allows donors to maximize donations in a single year and have more control over the impact of contributions on taxable income. Previously, this limit was at 60% of AGI. Giving beyond the 100% limitation may be carried over and used in the following five years.

For taxpayers that claim the standard deduction:

Taxpayers who do not itemize on their return can take a charitable deduction of up to $300 (single, married filing separate, HOH) / $600 (married filing jointly) for cash contributions to qualifying organizations on their return. This is an “above the line” deduction. The maximum is $300/$600 based on filing status.

If you have questions regarding the CARES Act changes for charitable contributions, please contact Anderson ZurMuehlen.

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