Are you looking for a way to maximize your charitable giving this year? The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides several opportunities to maximize your gifts and minimize taxes, including deducting up to 100 percent of your adjusted gross income (AGI) for cash gifts made during the 2021 tax year. The charitable provisions in the CARES Act are limited to gifts made in 2021 and will expire on December 31, 2021.
If you itemize:
- The CARES Act allows you to deduct up to 100 percent of your adjusted gross income (AGI).
- A five-year carryover applies to cash contributions in excess of this amount.
- Contributions to donor-advised funds are excluded.
If you take the standard deduction:
Taxpayers who take the standard deduction rather than itemizing their deductions will be able to claim a charitable deduction for cash gifts to qualified charities such as Washington University:
- $300 for single filers
- $600 for married couples filing jointly
- The charitable deduction does not qualify for gifts to supporting organizations or donor advised funds.
Gifts from Qualified Retirement Plans:
Retirement plan assets are some of the best assets to use to make a gift since the funds go into your account pre-tax. Given that cash gifts of any size to charity in 2021 can be deducted up to 100 percent of your AGI, you can withdraw funds from your IRA, 401(k) or 403(b) plans and subsequently donate the same amount to one or more charities and avoid taxes. While the distribution will be taxable as part of your AGI, the ability to deduct up to 100 percent of your AGI will eliminate the tax consequence.
We encourage you to consult your legal and tax advisor before making a charitable gift from your retirement plan. Please note:
- This opportunity is available for 2021, and only if you itemize deductions.
- If you are under age 59 ½, you will be assessed a 10 percent early withdrawal penalty which cannot be wiped out.
- If you are required to take a Required Minimum Distribution (RMD), you may make a Qualified Charitable Distribution (QCD) up to $100,000 to offset any RMDs and make additional charitable gifts beyond $100,000.
- Additional taxes, credits and deductions, such as medical expense deductions, Medicare IRMAA charges and taxation of Social Security benefits are tied to AGI. Withdrawals from an IRA, 401(k) or 403(b), even if deductible, can boost your AGI and may raise your taxes.
Plan with support
The Office of Planned Giving is here to support you throughout your gift planning process.