As we adjust to a new year with many changes on the horizon, we turn to something familiar: the CARES (Coronavirus Aid, Relief, and Economic Security) Act. The act was originally set to expire in 2020, but was extended into 2021 with a couple of key provisions. Here’s what the new stimulus package means for you in 2021 and the tax incentives you’ll receive when giving to charities, including Dana-Farber Cancer Institute and the Jimmy Fund.
1. Expansion of the universal charitable deduction for cash gifts
The universal charitable deduction has not only been extended but given a well-deserved upgrade. The new deduction is $300 for single filers and $600 for married couples filing jointly. This is available to taxpayers who take the standard deduction. This tax incentive is available for cash gifts to qualified charities (but not to supporting organizations or donor-advised funds).
2. Extension of the cap on deductions for cash gifts
Contributions to public charities are generally limited to a percentage of a taxpayer’s adjusted gross income (AGI). The CARES Act lifted the cap on annual contributions for those who itemize, increasing it from 60% to 100% of AGI for 2020 (and now for 2021). Any excess contributions available can be carried over to the next five years.
3. IRA Required Minimum Distributions (RMDs) reinstated in 2021
The CARES Act originally suspended the required minimum distribution from most retirement plans for 2020; this has currently not been extended into 2021. Donors age 70.5 and above can make qualified charitable distributions (QCDs) from their IRAs in 2021.
The full text of the bill as passed by Congress can be found here (see Sections 212 and 213 under Division EE – Taxpayer Certainty And Disaster Tax Relief Act Of 2020). There will certainly be clarifications and technical corrections coming out in the near future. President Biden has referred to this relief package as “a good start,” so stay tuned for more changes and more news cycles.
To learn more about how the CARES Act may affect your giving to Dana-Farber, please contact Erin McKenna at firstname.lastname@example.org or by phone at 800-535-5577.