Charitable Deductions

CARES Act Information

Did you know that some of your contribution to the Y might be tax deductible, even if you use the standard deduction?

CARES ACT TAX INCENTIVES EXTENDED—WITH A SMALL BOOST

A couple of key provisions of the CARES (Coronavirus Aid, Relief, and Economic Security) Act were extended into 2021 (and, in one case, increased). Here’s what the stimulus package means for you.

TAX INCENTIVES WHEN YOU GIVE TO CHARITY

An expansion of the universal charitable deduction for cash gifts:  The universal charitable deduction has not only been extended but given a well-deserved upgrade. The new deduction is $300 for single filers and $600 for married couples filing jointly. This is available to taxpayers who take the standard deduction. This tax incentive is available for cash gifts to qualified charities (but not to supporting organizations or donor advised funds).

An extension of the cap on deductions for cash contributions:  Contributions to public charities are generally limited to a percentage of a taxpayer’s adjusted gross income (AGI). The CARES Act lifted the cap on annual contributions for those who itemize, increasing it from 60% to 100% of AGI for 2020 (and now for 2021). Any excess contributions available can be carried over to the next five years. (For corporations, the law raised the annual limit from 10% to 25% of taxable income.)

Qualified Charitable Distributions

  • The CARES Act did not change the rules around the Qualified Charitable Distributions (QCD), which allows individuals over 70½ years old to donate up to $100,000 in IRA assets directly to charity annually, without taking the distribution into taxable income.

  • Under the CARES Act an individual can elect to deduct 100 percent of their AGI for cash charitable contributions. This effectively affords individuals over 59½ years old the benefits similar to a QCD. 

Determining a giving strategy is largely dependent on individual factors, such as income bracket, deductions, and personal goals. The Marshalltown YMCA-YWCA does not provide legal or tax advice. Donors should consult with their legal or tax advisors before making charitable gift to the Y or any other worthy charity.