Charitable Giving Incentives for 2021

On December 27, 2020, the Consolidated Appropriations Act (CAA) extended incentives for charitable donations originally created under the 2020 CARES act. These incentives are set to expire on December 31st, 2021.

Charitable Contribution Deduction for Taxpayers who claim the Standard Deduction:
Taxpayers who do not itemize their deductions (i.e. claim the standard deduction) may claim a charitable contribution deduction of up to $300 ($600 for married couples filing a joint return) for cash contributions made to a charity. It is an “above the line” adjustment to income that will reduce a donor’s adjusted gross income (AGI) and thereby reduce taxable income. It is important to note that a donation to a donor advised fund does not qualify for the new deduction.

Modification of Charitable Deduction Limit:
Individuals and corporations that itemize can deduct much greater amounts of their contributions. Individuals can elect to deduct cash donations up to 100% of their 2021 AGI (up from 60% previously). The limit for non-cash contributions remains at 30% of AGI. Corporations may deduct up to 25% of their net taxable income for 2021 (up from the normal 10%). The higher deduction limit does not apply to donations directed to a donor advised fund.

Please consult your tax advisor for specific tax advice regarding the CAA provisions.