Congress has provided several economic incentives to help address the far-reaching effects of the COVID-19 pandemic, including tax advantages for charitable giving, such as those found in the March 2020 CARES Act. In December 2020, the Consolidated Appropriations Act, 2021, was signed into law. It contains charitable giving tax incentives similar to those in the CARES Act, which are described below. Please note that these provisions are scheduled to expire at the end of 2021.
You may deduct gifts of cash to most public charities to offset as much as 100% of your adjusted gross income (AGI). As in 2020, for the 2021 tax year, you may deduct cash contributions to Bentley and most other public charities to offset up to 100% of your AGI. Ordinarily, the income tax charitable deduction for cash gifts is limited to 60% of your AGI. This 100% limit allows especially generous donors to reduce their 2021 federal income tax to zero. As usual, any unused cash contribution deductions may be carried forward for up to five years. Contributions to donor-advised funds or supporting organizations are not eligible for this deduction. Your ability to deduct up to 100% of your AGI with cash gifts is reduced by your gifts of appreciated assets such as publicly traded securities and real estate. That means your charitable deductions in 2021 cannot exceed 100% of your AGI, but you may be able to carry unused charitable deductions forward to future years.
It may not be the tax-wise choice to deduct up to 100% of your AGI. Because federal income tax rates are progressive, it is not a given that it will be to your advantage to deduct 100% of your cash contributions in 2021. We encourage you to check with your financial and other advisors to determine whether the 100% deduction makes sense for your specific circumstances.
If you don’t itemize, you may reduce your taxable income by up to $300 (or up to $600 for married couples filing jointly) for your charitable contributions in 2021. If you do not itemize your deductions, you can still reduce your taxable income by up to $300 (or up to $600 for married couples filing jointly) for contributions of cash to public charities using a "below-the-line" adjustment to reduce your taxable income.
If you are 70½ or older, qualified charitable distributions (QCDs) are still a great way to make contributions. If you are 70½ or older, a QCD (also known as an IRA charitable rollover) allows you to make tax-free gifts of up to $100,000 per year from your IRA to charitable organizations such as Bentley. A QCD remains a great way to make tax-advantaged contributions, especially if you don’t itemize your deductions. Please note: the CARES Act suspension of the required minimum distribution from most retirement plans for 2020 does not appear to have been extended into 2021.
You have important priorities for your family and loved ones, and we know that their health and financial well-being come first. When you are ready, we are here to help you shape a charitable gift plan that suits your needs and allows you to support Bentley’s important mission. If you have any questions, please feel free to contact us at firstname.lastname@example.org or leave a message to get a timely reply from Liz Siladi at 781-891-2475 or Kris Otto at 781-891-2586.