Special Tax Incentives for Giving in 2021
In response to the continuing global health crisis, a new federal stimulus bill, the Consolidated Appropriations Act, 2021, was signed into law on Dec. 27, 2020. The economic package for pandemic relief extends and expands charitable tax deductions from the previous legislation known as the CARES Act. These include:
An expansion of the universal charitable deduction for cash gifts
The previous stimulus legislation allowed deductions of up to $300 in charitable gifts in 2020 for people who took the standard deduction and didn’t itemize their taxes. The new measure extends this benefit through 2021 and expands the available deduction from $300 per return to $300 per single filer or $600 for those married and filing jointly. The adjustment does not apply to gifts made to a Donor Advised Fund.
Extension of the cap on deductions
Individuals who itemize may continue to deduct annual contributions up to 100% of their adjusted gross income (AGI) for cash gifts made to nonprofits such as Southwestern University. Gifts made to a Donor Advised Fund do not qualify for the increased deduction.
“Charitable IRA” rules, QCD’s and RMD’s
The IRA Qualified Charitable Distribution (QCD) allows individuals age 70 ½ or older to make an outright gift of as much as $100,000 annually to Southwestern from a traditional IRA. The withdrawal amount may count toward your annual required minimum distribution (RMD). Although the RMD is not required until age 72, the QCD can be a tax-wise way for you to make charitable gifts. The QCD must be paid directly from your IRA to Southwestern. Benefits include reducing your taxable income and helping further the work and mission of the university. Certain restrictions and requirements must be followed when making this type of gift. If you have questions, please call the Office of Planned Giving at Southwestern University at 512.863.1485.
For more information about how the extension of these CARES Act provisions may impact your specific financial situation, please consult with your tax, legal, or financial advisor(s).