[Post updated February 24, 2021]
The Tax Reform Bill that passed in 2017 essentially doubled the standard deduction for individual and joint tax filers. One of the most substantial consequences of that change was that the percentage of taxpayers who itemize their deductions went from around 35% to 6%. This major change meant that over 95% of taxpayers could no longer write off their gifts to charity.
During this difficult coronavirus era, the extended 2021 Coronavirus Aid, Relief and Economic Security (CARES) Act offers lesser known provisions to increase the tax-deductibility of donations to charities for individuals and corporations. The following temporary provisions apply only to donations made to public charities in 2021:
Federal CARES Act Extended Provisions for Charitable Contributions in 2021*
On December 27, 2020, another stimulus package was signed into law to help combat the far-reaching impacts of COVID-19. This bill extends the charitable tax incentives enacted by the Coronavirus Aid, Relief and Economic Security (CARES) Act back in March 2020, but it also provides some additional provisions for 2021.
Are you itemizing deductions?
The adjusted gross income (AGI) limit for cash contributions to qualifying public charities remains increased for individual donors. For cash contributions made in 2021, you can still elect to deduct up to 100 percent of your AGI (formerly 60 percent prior to the CARES Act).
Not itemizing? No Worries!
In 2020, The CARES Act allowed for an additional, “above-the-line” deduction for charitable gifts made in cash of up to $300 for individuals or joint filers. This provision is extended into 2021 for taxpayers that do not itemize but the now joint filers will be allowed to take an above-the-line deduction of up to $600 in charitable contributions this year*.
*Please consult a professional tax advisor for specific advice to your situation.
The window for taking advantage of these changes closes on December 31, 2021.
Rainbow Acres welcomes your questions about donations to our eligible 501 (c) 3 nonprofit. Thank you for your generosity and support during these challenging times.