How the CARES Act Impacts Charitable Giving for 2021
The American Rescue Plan Act of 2021, also called the COVID-19 Stimulus Package or American Rescue Plan, Pub L. No. 117-2 (March 11, 2021), is a US$1.9 trillion economic stimulus bill passed by the 117th United States Congress and signed into law by President Joe Biden on March 11, 2021, to speed up the country’s recovery from the economic and health effects of the COVID-19 pandemic and the ongoing recession.
First proposed on January 14, 2021, the package builds upon many of the measures in the CARES Act from March 2020 and in the Consolidated Appropriations Act, 2021, from December.
CARES ACT (The Consolidated Appropriations Act, 2021 extended the change for 2021.)
For the 2021 tax year, you can deduct up to $300 of cash donations per person without having to itemize, meaning a married couple filing jointly could deduct up to $600 of donations without having to itemize. This is called an “above the line” deduction. For more information, see “Expanded tax benefits help individuals and businesses give to charity in 2021” at the IRS website.
How much can I deduct?
Good news! In 2021, thanks to the CARES Act, you can deduct up to 100 percent of your adjusted gross income. In 2019, that number was only 60 percent. And if you’re wondering if you can reach that 100 percent mark using your donor advised funds (DAF), the answer is yes… IF 60 percent of your charitable contributions are cash given to your DAF and IF the remaining 40 percent is given to the charity as cash.
Your other option is to give 20 percent in cash to your Donor Advised Fund (DAF), 30 percent in appreciated assets, and 50 percent in cash directly to the charity. IRS Publication 526 has the details.
- The limit applies to all donations you make throughout the year, no matter how many organizations you donate to.
- Contributions that exceed the limit can often be deducted on your tax returns over the next five years — or until they’re gone — through a process called a carryover.
- For the 2021 tax year, you can deduct up to $300 per person rather than per tax return, meaning a married couple filing jointly could deduct up to $600 of donations without having to itemize.
- The CARES Act eliminated the 60% limit for cash donations to public charities.
In 2021, you can make deductible investments of up to $6,000 in an IRA or $7,000 if you’re 50 or older. Maxing out this account allows you to take full advantage of the tax savings Uncle Sam provides to build a secure future in your later years. It can also go a long way toward giving you the financial security you deserve as a retiree.
If you are 70 1/2 or older, you can make a Qualified Charitable Distribution (QCD) from your IRA up to $100,000 directly to Ability Connection Colorado. You can help the at-risk individuals served by Ability Connection Colorado and potentially receive a tax benefit.
A donation transferred directly from your IRA to a qualified charity like Ability Connection Colorado is generally not considered taxable income on your federal income tax return. As always, we recommend that you contact your plan administrator or professional advisor to determine if this type of gift is right for you.
Sell depreciated stock and donate the cash proceeds to Ability Connection Colorado. You will receive a charitable deduction as well as a capital loss benefit on the sale of stock. Capital losses offset capital gains, and the maximum net capital loss in any tax year is $3,000 for a married filing joint taxpayer ($1,500 for all other taxpayers). Any unused capital losses are rolled over to future years. Please consult with your tax professional for more information.
This information is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in any examples are for illustrative purposes only. References to tax rates include federal taxes only and are subject to change. State law may further impact your individual results.