Tax-wise Giving in 2021
The federal coronavirus relief legislation enacted in 2020 and 2021 included new rules to encourage charitable giving:
- If you are among the 90 percent of American taxpayers who take the standard deduction, you will once again be able to deduct $300 in charitable gifts from your gross income in 2021. That provision from the CARES Act was extended through 2021 in the December stimulus bill. Moreover, in 2021 a couple filing jointly may deduct up to $600. This above-the-line deduction applies only to cash gifts made directly to a non-profit such as Osprey Wilds; they cannot be made into a donor-advised fund.
- Also extended through 2021 is the CARES Act provision allowing you to deduct cash gifts up to 100 percent of your adjusted gross income (AGI) in 2020. The previous deduction limit for cash gifts was 60 percent. This effectively means a person could deduct all of their AGI by making gifts of cash to their favorite charities in 2021.
- Not extended for 2021 was the CARES Act waiver of required minimum distributions (RMDs) from IRAs. If you’re over 70 ½ talk to your tax advisor about whether a qualified charitable contribution (QCD) from an IRA could be the most cost-effective way for you to give. Remember, distributions made directly to charity are not treated as taxable income.
Two provisions of the SECURE (Setting Every Community Up for Retirement Enhancement) Act, passed by Congress and signed into law at the end of 2019, affected IRA accounts:
- The SECURE Act changed the age at which RMDs must begin (for those turning 70 ½ after 2019), but it made no change to the age at which Qualified Charitable Distributions (QCDs) may begin, which is also age 70 ½. So, even though some IRA owners will not have to start taking RMDs from their IRAs until they reach age 72, they will still be able to make QCDs from those accounts after they reach 70 ½. Check with your tax advisor about the significant tax advantages that could be available to you with a gift from your IRA. And keep in mind that your QCD is not limited to the amount of your RMD.
- Stretch payments to non-spouse IRA beneficiaries were limited to 10 years by the SECURE Act. If you planned to benefit your children with your IRA, your heirs will now pay higher taxes on the inheritance they receive from you. Consider funding a “give it twice” trust with your IRA balance. More formally known as a testamentary charitable remainder unitrust, these trusts can help you spread out an inheritance to your heirs over many years, reduce estate and income taxes, and leave a significant legacy to Osprey Wilds and other causes you believe in.
Donating appreciated stock or other assets remains a cost-effective giving option since you will receive a fair market value deduction at the time of your gift and avoid capital gains on the sale of the assets. And, if you made gifts of stock or other assets into a donor-advised fund earlier, please consider making a distribution from your account to support us at this time.
If you have questions or wish to discuss a gift, contact our Development Director, Jim DeYoung, at 320-245-7791 or firstname.lastname@example.org.