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IRS Offers Tax Incentive for Charitable Giving

October 18, 2021 | by John F. Leone
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Many individuals and businesses make charitable gifts during the holiday season. In addition to being a time of increased need for many non-profits, gifts made before the end of the tax year can bring income tax benefits. Thanks to an expansion of the allowances for charitable giving in 2021, there will be an even greater incentive to give back.

The Taxpayer Certainty and Disaster Relief Act of 2020 created multiple incentives to give. First, taxpayers who don’t itemize are not normally permitted to claim a tax deduction for charitable giving. Under the new rules, even if you use the standard deduction, you can deduct up to an additional $300 of cash contributions to qualifying charities. That amount increases to $600 for married couples filing a joint return.

For the roughly 10 percent of Americans who itemize their taxes, the IRS has added an expanded deduction as well. Typically, a person itemizing their taxes can claim deductions on cash gifts made to qualifying charities totaling between 20-60 percent of their adjusted gross income (AGI). In 2021, that number has been increased to up to 100 percent.

The final two points in the Taxpayer Certainty and Disaster Relief Act of 2020 focus on businesses. C Corporations are normally limited to deducting cash contributions made to qualifying charities totaling no more than10 percent of taxable income. For the calendar year 2021, that percentage has been raised to 25 percent.

Finally, with more Americans than ever struggling to put food on the table, the IRS has increased the limits on how much a business can deduct for charitable giving of food inventory from 15 percent to 25 percent.

The Lilly Family School of Philanthropy reports that in 2020, Americans gave a record $471.4 billion to charity. With the need ever-increasing, it is expected that these tax breaks will lead to even greater giving by the end of 2021.

If you have questions on the nuances of these rules, or want to ensure you or your organization are maximizing your tax savings and remaining in full compliance with the laws, please give me a call. I am happy to discuss your individual situation.

The Trust and Estate planning team at Gross Shuman PC has decades of experience assisting in the proper planning and execution of trust and estate documents. John F. Leone and his team are just a phone call away. Don’t leave your lifetime of work at risk. Call us today. 716-854-4300 ext. 243 or jleone@gross-shuman.com.