Tax advantages

New tax advantages for donors 

There is a new financial incentive for Americans to give generously to qualifying charities, including United Way of the Southern Tier and many of our community partners.

The new universal tax break for charitable donations was included in the final $2 trillion COVID-19 stimulus package signed into law in March 2020 and in effect for the 2020 tax year. The measure grants taxpayers an above-the-line deduction for up to $300 in charitable donations given in 2020. For example, if you take the standard deduction and give $300 to charity, you will get a $300 tax break in addition to the standard deduction.

According to AARP, for the 2021 tax year, the charitable deduction is even better, at least for those who file a joint return. While in 2020, the charitable limit was $300 per “tax unit” – meaning that those who are married and filing jointly can only get a $300 deduction – for the 2021 tax year, those who are married and filing jointly can each take a $300 deduction, for a total of $600.

Now is the perfect time to take advantage of this “above-the-line” opportunity and give to qualifying charities providing critical services to the Southern Tier.

Here is the tax benefit breakdown for those taking standard deductions, itemized deductions and corporate giving:

Standard Deduction

For people who take the standard deduction, the CARES ACT allows you to take a tax deduction for contributions made to qualified charitable entities up to $300 per year starting in 2020 – this deduction is “above-the-line.” The 2020 Standard deduction is $12,400 for individuals and $24,800 for married couples filing jointly. Therefore, any donation to qualifying charities of up to $300 will be added to the standard rate of deduction. This deduction applies for 2020.

Also for the 2021 tax year, according to AARP, the standard deduction will be slightly higher because of inflation adjustments. Those filing single returns (or married filing separately) get a $12,550 standard deduction; those filing joint returns get $25,100. Those who are at least 65 years old or blind get an extra $1,350 (or $1,700 if using the single or head of household status).

Itemized Deduction

For people who file for itemized deductions, the CARES ACT allows you to take a tax deduction of up to 100% of your Adjusted Gross Income (AGI) for contributions to qualifying charities in 2020 and in 2021. The previous limit on charitable giving was 60% of a taxpayer’s AGI prior to 2020, according to Fidelty Charitable.

Corporate Donations

For corporate donors, the CARES ACT allows an entity to take a tax deduction of up to 25% of their Adjusted Tax Income for contributions to qualifying charities in the 2020 and 2021 tax years. The limit prior to the new law was 10% of adjusted taxable income.

Looking for Year-End Giving Information? Click here