The Coronavirus Aid, Relief and Economic Security (CARES) Act, which became law in March of 2020, was updated through the Consolidated Appropriations Act of 2021 (CAA). For people who are interested in supporting William & Mary during these unprecedented times, key provisions of the law could influence charitable giving decisions made in 2021.
Impact on Charitable Gifts of Cash Made in 2021
- For those who do not itemize tax returns and claim a standard deduction:
The CARES Act created a temporary above-the-line charitable tax deduction for cash donations of $300 per tax filing unit, which was extended through 2021 by the CAA. This deduction is only available to individuals who do not itemize their returns and claim the standard deduction ($12,550 for singles, $18,800 for head of household, $25,100 for married filing jointly). The CAA update increased the deduction amount to $600 for married couples filing jointly ($300 per individual).
- For those who itemize tax returns:
The cap on deductions taken for annual contributions was lifted from 60% to 100% of AGI for cash gifts made to public charities under the CARES Act. This provision was extended through 2021 under the CAA. Any excess can be carried forward for five (5) years. Gifts made to Donor Advised Funds (DAFs) do not qualify for the increased deduction. While cash gifts to charitable remainder trusts and charitable gift annuities are not specifically mentioned in the law, these types of gifts will likely be excluded. Please speak with your professional advisors for information specific to your individual situation.
Impact on Retirement Accounts for 2021
- The CARES Act provided a temporary waiver of Required Minimum Distributions (RMDs) for some owners of Individual Retirement Accounts (IRAs) in 2020. This waiver was not extended under the CAA. With RMDs expected to resume in 2021, individuals with IRAs who are age 72 (or 70 ½ for those who turned 70 ½ before January 1, 2020) should work with their professional advisors to determine the best strategy for managing an annual RMD or making charitable gifts directly through their IRAs.
In addition to the incentives included in the CARES Act and CAA for charitable gifts of cash, individuals may consider using highly appreciated securities to fund charitable gift annuities or charitable remainder trusts that provide income. Additionally, outright gifts of appreciated securities may potentially eliminate capital gains tax because donors can claim the fair market value charitable deduction for the tax year in which the gift is made. We recommend discussing options with your professional advisors.
If individuals or their advisors have questions or would like additional information, please contact Kirsten Kellogg, Executive Director of Principal Gifts and Gift Planning, (firstname.lastname@example.org; 757-585-8536) or Rachel Drazdowski, Director of Gift Planning Administration, (email@example.com; 757-221-1291) in the Office of Gift Planning.