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Benefits of the CARES Act Extended in 2021
As we navigate these challenging times, all of us at the Western Pennsylvania Conservancy hope that you and your loved ones stay healthy and safe.
The Conservancy has made every effort to stay mission-focused since the start of the pandemic. Fortunately, the Coronavirus Aid, Relief and Economic Security (CARES) Act brought some new benefits for individuals and corporations who wanted to provide much-needed support to charitable organizations. In December 2020, Congress passed legislation that extended many of the CARES Act’s benefits through 2021, creating unique financial opportunities for people to support causes important to them.
If you take the standard deduction on your 2020 tax return, you may claim an "above-the-line" deduction of up to $300 per taxpayer for cash donations to nonprofits. This provision will continue for 2021. The measure applies to gifts to qualified charities, such as WPC, but does not include gifts made from a donor advised charitable fund or gifts of stock.
New in 2021 is an additional “above the line” deduction for those married filing jointly. Joint filers (who aren’t itemizing) will be allowed to take an above-the-line deduction of up to $600 in cash contributions to charity this year.
If you itemize your deductions for 2020, you may continue to take charitable deductions equal to up to 100% of your Adjusted Gross Income. The amount you can deduct for cash contributions is generally capped at 60% of AGI. For business owners, the increased limit of 25% is still in effect (increased from 10%). This measure applies to cash gifts to public charities and is not applicable to gifts from private foundations or donor advised funds.
IRA Gifts - RMD suspension not extended
The CARES Act suspension of the required minimum distribution (RMD) from most retirement plans for 2020 does not seem to be extended into 2021.
However, you can still support Fallingwater with a gift from your retirement plan: If you are over 70½, you can give up to $100,000 each year tax-free from your IRA to charity, called a "qualified charitable distribution" or QCD. The gift counts as your required minimum distribution but isn't included in your adjusted gross income. (Even though the minimum age for RMDs rose to 72, it's still 70½ for QCDs.)
If John and Nancy had an adjusted gross income of $100,000 and gave $100,000 cash to charity, they could previously only offset $60,000 of their income. This year, because of the CARES Act, they can offset the full amount of their AGI, and therefore their entire $100,000 donation can be deducted and will offset their income for 2020.