NEW: 2021 Tax Deductions for Charitable Donations

NEW: 2021 Tax Deductions for Charitable Donations

Tax law changes in 2021 allow some added tax benefits for those donating to charity.  Here are four expanded benefits.

  1. Non-itemizers get an expanded benefit. The 2017 Tax Act increased the Standard Deduction such that nearly 90% of taxpayers no longer itemize.  For 2020 a $300 deduction was allowed as an adjustment to income on all tax returns for cash donations – non-cash donations do not qualify.  For 2021 Married Couples will be able to claim $600 for cash donations – $300 still applies for those Single taxpayers.  Cash donations mean debit or credit card, check, cash, or unreimbursed out-of-pocket expenses to a qualifying charitable organization.
  2. Higher donation limits for those who itemize. Donations to qualifying charitable organizations are usually limited to 20% to 60% of Adjusted Gross Income (AGI), depending on the type of charitable organization.  For 2021 these limits are increased to 100% of AGI.  One needs to make an election on the 2021 tax return for the higher limits.
  3. C Corporation limits are increased. The normal limit for C Corps is 10% of taxable income, but for 2021 this is increased to 25% of taxable income.  Like the individual limits, an election(s) must be made on the 2021 tax return.
  4. Higher limits for businesses for food donations. Specified food inventory donations by businesses may qualify for increased limits, from 15% to 25%.  The 25% of taxable income for C Corps, as noted in #3 above applies.  For other business entities, S Corps, Partnerships, and Sole Proprietors, the limit is computed on the personal return where the income passes through to for tax assessment purposes.  There is also a special method for computing the enhanced deduction, and there are also other requirements, including food quality standards.

 

These are one-time enhancements to charitable donations that are effective only for 2021 unless extended by Congress.  As with any donations to Charity you should get a receipt from the Charity and keep it with your tax documents.

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