Estate Planning Blog

CARES Act Charitable Contribution Extended for 2021

For 2021, giving to charity pays off. The Consolidated Appropriations Act (CAA) extended numerous provisions contained in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law in March 2020. These provisions include tax changes that allow donors to give more to charity at a lower cost.

For those who itemize their deductions, the charitable contribution limitation has been extended for 2021. The limitation for cash contributions, formerly set at 60%, has now been raised to 100% of an individual’s adjusted gross income (AGI). This means donors who itemize their deductions can now give more before reaching their AGI limitation. In addition, any giving beyond the 100% AGI limitation may be carried over and used in the next five years, but the enhanced deduction expires after 2021.

These enhanced tax benefits also apply to corporations. Corporations may continue to deduct charitable gifts up to 25% of the corporation’s taxable income, an increase from 10% prior to the CARES Act.

For those who don’t itemize their deductions, the CARES Act extension also expanded above-the-line charitable deductions. The CAA extends the CARES Act’s allowance for up to $300 of an individual taxpayer’s charitable contributions to qualify as an above-the-line deduction. Married couples who file joint returns can claim up to $600 as a deduction.

In order to qualify for these enhanced tax benefits, certain conditions need to be met. Contributions must be made to a public charity or certain limited types of private foundations. Family foundations, corporate foundations and private non-operating foundations are excluded, along with supporting organizations under Section 509(a)(3) and Donor Advised Funds.

Another condition that must be met is the type of contribution made. Both individual and corporate taxpayers must make a cash donation. Contributions of any kind of property, including marketable securities, real assets or otherwise, do not qualify.

The new legislation also increases penalties for nonitemizers who overstate the value of charitable gifts. If the IRS determines you’ve overstated your charitable tax deduction, you may be assessed a penalty of 50% of your total deduction amount, an increase from 20% under prior law.

For more information about tax deductions for your charitable giving, contact your McBrayer attorney today.

This blog was authored by our Estate Planning Team.

Ivan Schell is a Member of McBrayer PLLC. His multifaceted legal practice includes estate planning and administration, private foundation and public charity formation and planning, physician practice consultation and healthcare law, employee benefits law, and closely-held corporation planning transitions. He can be reached at ischell@mcbrayerfirm.com or by calling (502) 327-5400, ext. 2351.

Sean Mumaw is a McBrayer Member practicing out of both the Louisville and Lexington offices. His practice area focuses on estate planning but also includes tax (estate, gift, income, and inheritance), general business law, business succession planning, real estate, and the like. He can be reached at smumaw@mcbrayerfirm.com or (502) 327-5400, ext. 2304.

McBrayer attorney Maxine Bizer centers her practice on estate planning and administration and probate. She practices in McBrayer's Louisville office. Ms. Bizer can be reached at mbizer@mcbrayerfirm.com or (502) 327-5400, ext. 2354.

Services may be performed by others.

This article does not constitute legal advice.