Cares Act Tax Benefits
Charitable giving provides better tax benefits in 2021
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.