Effective in December 2020, the Consolidated Appropriations Act extended certain charitable provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Below is a summary of those provisions that are effective for the 2021 tax year.
Individual Income Tax
If you itemize deductions:
• You can deduct up to 100 percent of your adjusted gross income (AGI) for gifts of cash in 2021—up from 60 percent in 2019.
For example, a donor with an AGI of $1 million could donate $1 million in cash to OMAA and receive a federal income tax deduction of $1 million.
• This time-limited benefit only applies to gifts to OMAA or other public charities. It is not applicable to gifts to donor advised funds (DAFs) or supporting organizations (such as charitable trusts that benefit public charities) or foundations supporting only a specific organization).
• The 100 percent limit is reduced dollar-for-dollar by other itemized charitable deductions. This means that in 2021, a donor who deducts 30 percent of their AGI in long-term appreciated property gifts will be able to also deduct up to 70 percent of AGI for qualified cash gifts—a total deduction of up to 100 percent of AGI.
If you take the standard deduction:
• You may claim up to $300 in charitable deductions ($600 for joint filers) in 2021. Unlike last year, for 2021, this deduction is taken “below the line,” so that it reduces a taxpayer’s taxable income, it does not reduce adjusted gross income (AGI).
The IRA Qualified Charitable Distribution (QCD)
• Donors who are 70½ or older may transfer up to $100,000 to OMAA and other charities as a QCD each year. A QCD can satisfy a pledge and the rollover amount is still excluded from taxable income—no need to itemize.
• Many donors may find the IRA QCD a taxwise option beginning at age 70 ½, though (as of January 1, 2020) required minimum distributions (RMDs) are not required until age 72.
Please review your personal situation with your tax advisor.