Year-End Planning? Advice from our partner BKD to guide your decisions
Did you know that over 30% of annual giving happens in December? If you are considering making a gift to The Villages or another charitable organization before the end of 2021, you might be curious about the current benefits to 2021 taxes. We asked our accounting partner and Villages Corporate Partner for details pertaining to 2021 tax regulations.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provided many charitable contribution deduction incentives to continue to encourage charitable giving. The 2021 Consolidated Appropriations Act (CAA) extended and increased many of the 2020 CARES Act provisions.
Giving for joint filers and individuals – Allowing taxpayers that take a standard deduction to deduct up to $300 of cash donations while still taking that standard deduction. For 2021, this benefit is still allowed and enhanced by allowing $600 for joint filers.
Prior to the enactment of the CARES Act in 2020, taxpayers were able to deduct cash contributions to public charities up to 60% of their adjusted gross income. The CARES Act removed this limit and allowed taxpayers to deduct up to 100 percent of their AGI. This benefit has been extended into 2021. The limit to private foundations and donor- advised funds (DAF) remains at 60 percent of AGI.
Qualified Charitable Distributions (QCD) from IRAs – With the return of required minimum distributions for 2021, the ability to use QCDs remains. A QCD is a charitable contribution made directly from the IRA to the desired charity. It satisfies the requirement to take distributions from the IRA (up to $100,000 annually) but is not taxable income to the IRA holder. This is a beneficial strategy for retirees who are not able to itemize deductions because while QCDs allow for the ability to not recognize income, there is no separate itemized deduction.
Gifts of Appreciated Securities – With the strength of the market during the second half of 2020 and to date in 2021, many taxpayers are holding securities that have appreciated in value. Gifting those securities to qualified charities allows the taxpayer to take a deduction at the fair market value on the date of the gift and avoid recognizing the gain that would have occurred if the security had been sold.
The recommendations outlined above are excerpts from BKD Thoughtware. Read the entire article via this link. In general, taxpayers aiming to manage their tax bill via various charitable contribution strategies need to be aware of their current and potential tax rates to assess the best timing for gifts. BKD recommends consulting with your accountant about your charitable giving strategy
BKD CPAs and Advisors and The Villages
BKD is The Villages accounting firm of record. The Indianapolis accounting team has supported The Villages with time, treasure and talent for over 20 years. In 2021, the firm is a Heroes for Children Corporate Partner with funding allocated to this month’s National Adoption Month along with:
- Ongoing training and support groups that help caregivers meet the unique need of each child in their care.
- Meals and/or gift cards that allow caregivers to have a moment to rest and replenish.
- Unexpected and addition expenses for caregivers to support children, such as tutors, a new pair of glasses, backup generator for a family with a medically fragile child on oxygen.
- Post adoption services: support groups, counseling services, special items or equipment needed for a child with specials needs.
- Holiday Support that provides funding for presents and holiday celebrations for children in foster care.