The CARES Act and other stimulus packages enacted in 2020 and 2021 have encouraged individuals and businesses to maintain or increase their charitable giving even when they may be facing their own struggles in the wake of the COVID-19 pandemic.
Effective for 2020 and 2021, individuals who itemize deductions on their federal income tax returns may write off the full amount of any cash contributions they make during the year to qualifying nonprofits, including publicly funded charities and certain foundations but excluding private foundations or donor-advised funds. In fact, you may choose to donate all your adjusted gross income (AGI) to a charitable organization in both years and avoid paying federal taxes on that income. Ordinarily, the deduction would be limited to 60 percent of the taxpayer’s AGI.
If you do not itemize and instead claim the standard deduction in 2020 and/or 2021, you may be able to deduct from your taxable income up to $300 per year for cash contributions you make to qualifying nonprofits. For 2021, non-itemizing married couples filing joint tax returns can claim an above-the-line deduction of up to $600 in cash contributions made to qualifying charities this year.
The economic stimulus enacted over the past year has also made it more beneficial for retirees age 72 or older to increase their philanthropy while decreasing their tax liabilities in 2020 and 2021. Rather than taking taxable required minimum distributions from your retirement plans (i.e. IRA or 401(k), you may instead transfer as much as $100,000 per year from your retirement accounts directly to a qualifying nonprofit organization via a qualified charitable distribution (QCD).
It is important to note that each of these charitable giving incentives apply solely to cash contributions made directly to qualifying not-for-profits.
The CARES Act also provides a boost to corporate giving in 2020 and 2021 by increasing the deduction C corporations may receive for charitable contributions of cash to 25 percent of the business’s taxable income, up from 10 percent. For all other business entities whose company income passes through to its owners, the increased individual charitable deduction of up to 100 percent of AGI will apply.
Charitable giving has always played a critical role in estate planning, providing families with opportunities to maximize tax-efficiency and create a legacy of philanthropy for the greater community good. During these very challenging times, families may consider working with their professional financial advisors to accelerate their giving strategies and ensure essential services continue to reach those in need.
About the Author: Lee F. Hediger is a co-founding director and chief compliance officer with Provenance Wealth Advisors (PWA), an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs, and a registered representative with Raymond James Financial Services. For more information, call (954) 712-8888 or email
Provenance Wealth Advisors, 515 E. Las Olas Blvd., Ft. Lauderdale, FL 33301 (954) 712-8888. Lee F. Hediger is a registered representative of and offers securities through Raymond James Financial Services, Inc., Member FINRA/SIPC.
Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors + CPAs. PWA is not a registered broker/deal and is independent of Raymond James Financial Services. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc., and Provenance Wealth Advisors. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of the advisors of PWA and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making any investment decision, please consult with your financial advisor about your individual situation.
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Posted on June 30, 2021