Cares Act Tax Benefits
Charitable giving provides better tax benefits in 2021
The Consolidated Appropriations Act (CAA) extended certain provisions contained in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law in March 2020. These provisions include tax changes that allow donors to give more to charity at a lower cost.
For those who itemize their deductions, the limitation for cash contributions to charity, formerly set at 60%, has now been raised to 100% of an individual’s adjusted gross income (AGI). This means donors who itemize their deductions can now give more before reaching their AGI limitation. In addition, any giving beyond the 100% AGI limitation may be carried over and used in the next five years, but the enhanced deduction expires after 2021.
For people who do not itemize on their tax returns, the CARES Act extension also expanded above-the-line charitable deductions. The CAA extends the CARES Act’s allowance up to $300 of an individual taxpayer’s charitable contributions to qualify as an above-the-line deduction. Married couples who file joint returns can claim up to $600 as a deduction.
These enhanced tax benefits also apply to corporations. Corporations may continue to deduct charitable gifts up to 25% of the corporation’s taxable income, an increase from 10% prior to the CARES Act.