What the CARES Act means for your charitable giving in 2021
Understand how the new stimulus package may impact your charitable contributions in the 2021 tax year.
On December 27, 2020, another stimulus package was signed into law to help combat the far-reaching impacts of COVID-19. In many ways, this bill extends the charitable tax incentives enacted by the Coronavirus Aid, Relief and Economic Security (CARES) Act back in March 2020, but it also provides some additional provisions.
As you look for ways to help those in need, be sure to visit our giving guidance page and understand how the following provisions may impact your charitable contributions in the 2021 tax year.
Are you itemizing deductions?
The adjusted gross income (AGI) limit for cash contributions to qualifying public charities remains increased for individual donors. For cash contributions made in 2021, you can elect to deduct up to 100 percent of your AGI (formerly 60 percent prior to the CARES Act).
Interested in corporate giving?
The AGI limit for cash contributions also remains increased for corporate donors. In 2021, corporations can deduct up to 25 percent of taxable income (formerly 10 percent prior to the CARES Act).
Not itemizing?
The CARES Act allowed for an additional, “above-the-line” deduction for charitable gifts made in cash of up to $300. This provision is extended into 2021 for taxpayers filing single/separately.
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.
Wondering about your Fidelity Charitable Giving Account?
These incentives apply only to cash contributions to public charities and do not apply to contributions to supporting organizations or public charities that sponsor donor-advised funds. However, there have been no changes to existing deductions for contributions made to a donor-advised fund sponsor like Fidelity Charitable. This means you are still able to deduct up to 60 percent AGI in cash and up to 30 percent AGI in appreciated assets contributed to a donor-advised fund.
Existing carry-over rules still apply, so if your donations this year exceed your AGI deduction limits, you may carry forward excess deductions for up to five subsequent tax years. As always, donors should consult with their tax and legal advisors when considering their charitable giving.
What about IRA Qualified Charitable Distributions (QCD)?
The CARES Act did not change the rules around the QCD, which allows individuals over 70½ years old to donate up to $100,000 in IRA assets directly to charity1 annually, without taking the distribution into taxable income.
However, remember that 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; they can take a cash distribution from their IRA, contribute the cash to charity, and may completely offset tax attributable to the distribution by taking a charitable deduction in an amount up to 100 percent of their AGI for the tax year.
If you’re planning a large donation in 2021, this may be a smart strategy as long as you are between the ages of 59½ and 70½ and are not dependent on existing retirement funds.
1 – Sponsoring organizations with donor-advised fund programs are not qualifying charities for QCDs.