The Coronavirus Aid, Relief, and Economic Security (CARES) Act was originally implemented in March 2020 as a way to provide economic assistance to U.S. families, workers, small businesses and industries impacted by the COVID-19 pandemic. In December 2020, Congress enacted a second stimulus bill (The Consolidated Appropriations Act or CAA) that extended and modified charitable provisions of the CARES Act through 2021.
As with the CARES Act in 2020, the new provisions of the CAA continue to make 2021 an excellent opportunity for charitable giving.
Here are four of the reasons you should consider making a charitable contribution before the end of the year:
- Individual donors can deduct cash donations up to 100% of adjusted gross income (AGI) (previously a 60% limit). For example, a donor with taxable AGI of $100,000 who makes a $100,000 cash gift will have no federal income tax liability for 2021. Donors with multiyear pledges may want to consider accelerating payments to take advantage of this opportunity.
- Individual taxpayers who take the standard deduction can claim a $300 “above-the-line” deduction for cash gifts to public charities. For 2021, this “above-the-line” deduction has been increased to $600 for married couples filing jointly.
- Individual donors must resume taking required minimum distributions from their IRAs or other retirement accounts in 2021 (the suspension of this requirement under the CARES Act has not been renewed). Donors age 70 1/2 and older can make a charitable IRA rollover or other qualified charitable distribution to Cleveland Clinic to avoid the tax consequences of required distributions. Tax-free distributions can be made up to $100,000 per individual.
- Corporate donors can deduct cash donations up to 25% of modified taxable income (previously a 10% limit). This deduction rate also applies to donations of food inventory.
It’s important to know these provisions only apply to cash gifts made to public charities such as InMotion. Stock gifts remain deductible for up to 30% of AGI. Also, these provisions do not apply to gifts made to donor-advised funds, supporting organizations, or private foundations.
Gifts through a Donor-Advised Fund (DAF)
A donor-advised fund, or DAF, is a giving account established at a public charity, such as a community foundation. It allows donors to make a charitable contribution, receive an immediate tax deduction and then recommend grants from the fund over time. Donors can contribute to the fund as frequently as they like, and then recommend grants to their favorite charitable organizations (such as InMotion), whenever it makes sense for them. Please note: donors may not receive personal benefit (including goods and services) from grants.
Gift of Appreciated Stock
A gift of appreciated stock (held for more than one year) to InMotion can benefit you in two ways: you receive a charitable income tax deduction for the full fair market value of the securities, and at the same time you may avoid capital gains taxes on appreciated stock. This helps your gift go even further!
Qualified Charitable Distributions
Do you have remaining funds in your 2021 Required Minimum Distribution (RMD)? You may be able to convert your leftover RMD into a Qualified Charitable Distribution (QCD) as a gift to InMotion. A QCD is a direct transfer of funds from your IRA, payable directly to a qualified charity such as InMotion, as described in the QCD provision in the Internal Revenue Code. Amounts distributed as a QCD can be counted toward satisfying your RMD for the year, up to $100,000. There can be certain tax advantages to this type of conversion. Please contact your tax advisor to determine your eligibility.
Please note: this material presented on this page has been prepared for information purposes only, and is not intended to provide, and should not be relied on for, tax, legal, accounting, or financial advice. You should consult your own tax, legal, accounting and financial advisors before engaging in any transaction.