CARES Act Tax Incentives for 2021
Generally, only those who itemize deductions may deduct charitable contributions. In 2021, individuals not itemizing deductions may take a charitable deduction of up to $300 per individual, or $600 for those who are married and filing jointly.
Individuals who itemize may deduct qualified contributions of up to 100% of adjusted gross income (AGI), rather than the prior limitation of just 60%. Corporations (C Corporations) can deduct qualified contributions up to 25% of taxable income (formerly limited to 10%).
Contributions to Donor Advised Funds (DAFs) do not qualify for the new incentives. There have been no changes, however, to the “normal” AGI limits when contributing to DAFs. The result is that a taxpayer may still deduct up to 60% of AGI in cash contributed to a DAF.
Using Your IRA RMD to Make Charitable Contributions
The CARES Act did not change the rules regarding charitable contributions from IRA accounts. Individuals over 70 ½ may annually donate up to $100,000 in IRA assets directly to a charity. These “Qualified Charitable Distributions” (QCDs) may be made tax-free if directed to a nonprofit organization like CFNLA. Notably, QCDs may not be made to a DAF but may be made to all other types of funds at CFNLA or to another nonprofit.
If you are considering any of the strategies listed, please consult your personal tax advisor.
Contributing to a Donor Advised Fund
A higher standard charitable deduction threshold was implemented in 2017. To itemize deductions, the total deduction must exceed $12,550 for an individual (up from $6,350) or $25,100 for married couples filing jointly (up from $12,700). To take advantage of higher deductions, use a Donor Advised Fund (DAF) to condense several years of charitable giving into 2021 and gain the maximum tax benefit allowed.
Interested in starting a DAF? Consider the following information about CFNLA DAFs:
- DAFs may be opened in one day with a minimum contribution of $5,000;
- DAFs allow donors to make a charitable donation in 2021 while recommending grants to the charitable organizations of their choice at a later date;
- DAFs allow donors to consolidate all annual charitable giving so the donor receives only one tax receipt while supporting multiple charitable organizations;
- Donors may contribute cash, securities, real estate and other appreciated assets;
- DAFs may be either Endowed, Unendowed or some combination of both depending on the Donor’s preference;
- A Donor creating a fund with a minimum contribution of $250,000.00 may recommend a financial advisor for the fund (pursuant to certain conditions); and
- Unlike a private foundation, a DAF does not have an annual payout requirement.
Looking for a Louisiana Business Tax Incentive?
Businesses may donate up to $5,000 to our local childcare resource and referral agency, Northwestern State University, and receive a dollar-for-dollar credit against Louisiana Income Taxes with the School Readiness Tax Credit.