2021 Charitable Tax Benefits
In 2020, tax benefits for charitable giving were established to encourage individuals to continue to support charities during the coronavirus pandemic. These charitable tax benefits have been extended through 2021. Below are some of the benefits to share when talking to donors about supporting your nonprofit organization this year.
- The universal charitable deduction allows single tax filers to deduct up to $300, while couples filing jointly can deduct up to $600 for gifts made to charity.
- The cap on annual cash contributions for those that itemize their taxes increased from 60% to 100%. This applies to both federal and state taxes. Any excess contributions available can be carried over for the next five years.
Donors age 70 ½ and older have additional options to receive tax benefits when they make a charitable contribution through their individual retirement account (IRA). Donors in this age demographic may make gifts to qualified charities up to $100,000 without having to pay income tax.
Additionally, the year a donor turns 72 they must take the required minimum distribution (RMD) from an IRA. Making a gift to a qualified charity through an IRA satisfies the donor’s RMD and can reduce annual income, which may help lower Medicare premiums and decrease the amount of Social Security subject to tax.
Educating donors about these tax benefits may yield larger gifts to support the works of your nonprofit organization.