Almost nine months after the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) passed, 2020 ended with another stimulus package, extending many of the charitable incentives implemented earlier that year. Be sure to understand which provisions have been extended and how they may influence charitable giving in 2021. Below are a few of the changes that could impact you:
Required Minimum Distributions (RMD) Will Resume in 2021
- Those who are age 72 and older must resume taking a RMD in 2021
- Donors age 70 ½ and older may still choose to make a qualified charitable distribution (QCD) through their IRA up to $100,000.
- A QCD would be excluded from taxable income and would also lower the IRA balance for future RMDs.
Charitable Deduction Impacts for 2021:
Increased Limits: For those who plan to itemize, you can deduct up to 100% of your adjusted gross income (AGI) (up from 60%).
Increased above-the-Line deduction: Charitable contributions up to $600 may be deducted for couples taking the standard deduction ($300 deduction for individuals).
What types of gifts qualify?
Contributions must be in the form of cash
Only applies to charitable gifts made in the 2020 or 2021 calendar year
Not applicable for contributions to donor-advised funds or non-operating private foundations
What the CARES Act could look like for you
Increase this year’s giving to take advantage of tax savings:
Example: Donor typically gives $25,000 annually. They have an adjusted gross income (AGI) of $100,000. This year, they decide to combine the next 4 years of gifts into 2021 to take advantage of the increased charitable deduction limits. Donor pays zero dollars in income taxes in 2021 and limits their giving for the next few years.
Donate cash from an IRA withdrawal:
Example: Donor has an adjusted gross income (AGI) of $100,000 and does not fully rely on income from their IRA. They decide to gift $25,000 cash from the IRA to charity. This money is taxable income, however using the CARES Act they can deduct up to 100% of their adjusted gross income and lower their income tax burden by $25,000.
These scenarios are for illustration purposes only and should not be considered legal, accounting, or other professional advice. We encourage you to consult with your tax advisor to discuss your individual benefits. If you have questions on how the CARES Act may impact your giving to Orlando Health, or if you would like to discuss tax-wise ways of giving, please contact our Planned Giving Team.