28 Sep 2021 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.
- 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.
- 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.
- 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.
- 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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