Charitable Giving Tax Information

2021 Legislative Update

Congress has renewed the universal charitable deduction for the 2021 tax year (details below). Keep in mind that it is no longer an "above the line" deduction for 2021 and does not reduce adjusted gross income. 

Also renewed for 2021 is the increased maximum cash deduction (details below).

The paused required minimum distribution was not renewed for 2021.

Please be sure to check with your tax advisor for charitable giving planning.

Questions? Contact Anthony Barbuto, Associate Vice President, Institutional Advancement at 978-232-2362.

Taxes & the Economic Stimulus Bill (The CARES Act)

To support the economy during the COVID-19 crisis, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, to provide economic stimulus during a time of uncertainty. The federal government included incentives for individuals and corporations to continue giving to nonprofits (not including donor advised funds or supporting organizations).

We are happy to provide a look at the charitable portions of the CARES Act with the hope that it will be beneficial to you. These changes in the tax code apply to the 2020 tax year, which means that you will see the benefits when you do your taxes next year.

Universal Charitable Deduction

Most Americans no longer itemize deductions on their taxes. The CARES Act now allows an “above the line” deduction of $300 for individuals and $600 for married couples filing joint for non-itemizers. An “above the line” deduction reduces income prior to applying any other deductions, including the standard deduction. The benefit is that you can now take a deduction in addition to the standard deduction for charitable gifts up to $300 for singles and $600 for married couples.

This means that you can make a gift to your favorite charity to help in this time of need, such as the Wings Fund at Endicott, up to the $300 for filing single and $600 for filing jointly. If you are in the 22% federal tax bracket, your $300 gift would save you $66 on your taxes. This is a great deal, especially if you already intended to make the gift.

Thank you if you have already made your annual gift to Endicott. Remember to take advantage of this change when you file your taxes next year.

Increased Maximum Cash Deduction

The maximum deduction for cash gifts has gone up to 100% of adjusted gross income (AGI). Previously the maximum deduction for cash gifts was 60% of an individual or jointly filing a couple's adjusted gross income. The maximum deduction for appreciated assets (stocks, bonds, mutual funds, real estate, etc.) remains 30% of AGI. The most obvious benefit of this change is that it is possible to pay no federal income tax if your charitable donations equal your AGI. This benefit holds the greatest value for wealthy individuals who have significant cash assets and want to make a difference during the current crisis. The tax code is complex, and some individuals may be better off not taking advantage of this change, so talk to your tax advisor to find out what is best for your situation.

Paused Required Minimum Distributions

Retirees, and anyone close to retirement, are well acquainted with the required minimum distribution (RMD) from IRAs and other retirement accounts. The CARES Act pauses RMDs for 2020, allowing individuals to pull less money out of their retirement accounts. Please note that this does not affect the ability to make a qualified charitable distribution (QCD) from an IRA account. You can still make tax advantaged direct distributions to qualified charities from your IRA. Remember that direct QCD gifts to charities do not count as income and therefore you would pay no taxes on the withdrawal.