Unique 2021 Tax Advantages for Charitable Giving
August 25, 2021
The Community Foundation of Northeast Iowa is sharing tips for how individuals can maximize their charitable giving tax advantages for 2021 before year end.
The CARES Act (Coronavirus Aid, Relief and Economic Security Act) was enacted in 2020 to allow taxpayers who do not itemize their taxes to receive a tax benefit for charitable giving up to a certain threshold. This benefit rolled over to 2021 and allows individuals to receive a charitable deduction of up to $300, and now up to $600 for those married filing jointly, for cash gifts to public charities.
While non-cash gifts do not qualify for the CARES Act deduction, these types of donations have tax advantages of their own. For example, gifts of appreciated securities (e.g., stock, mutual funds, bonds) allow an individual to donate the full amount of the gift to a nonprofit without the organization owing capital gains tax. Individuals also receive a 2021 charitable tax deduction of 100 percent of adjusted gross income, normally set at 30 percent of adjusted gross income, which can be reinvested into their portfolio to do more good.
“Many people do not realize they can make a donation to a nonprofit organization through stock, bonds, etc.,” said Laurie Everhardt, director of development with the Community Foundation of Northeast Iowa. “It’s a great way to make a tax savvy gift to your charity of choice without pulling from your regular cash flow.”
Another giving option worth noting is the Qualified Charitable Distribution (QCD), also known as the IRA Charitable Rollover. Individuals age 72 or older who have an IRA, must take a required minimum distribution from their account. This distribution is considered taxable income and gifts can be made from an IRA directly to a charitable organization, satisfying the distribution requirement and skipping the tax. This includes establishing a designated fund with the Community Foundation that provides grants to your favorite nonprofit. While the required distribution age has increased, anyone age 70 ½ or older can make direct IRA transfers of up to $100,000 annually to qualified charities without being subject to federal income tax. A QCD cannot be used to establish or gift to an existing donor advised fund.
Every individual’s situation is unique and there are many ways to give through your local Community Foundation that may align with your charitable goals. The Community Foundation of Northeast Iowa recommends you discuss options with a tax or financial advisor. More information about ways to give can be found at www.cfneia.org/giving/how-you-can-give.
For questions about giving through the Community Foundation, contact Laurie Everhardt at 319-243-1352 or leverhardt@cfneia.org.
