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Immediate Tax Advantages For Donors

October 21, 2021

A financial incentive encourages Americans to give generously to qualifying charities, including United Way of Roanoke Valley. The new universal tax break for charitable donations was included in the final $2 trillion COVID-19 stimulus package signed into law in 2020, and the expanded provision continues for 2021.

The measure grants taxpayers an above-the-line deduction for up to $300 in charitable donations given in 2021. For example, if an individual takes the standard deduction and gives $300 to charity, they will get a $300 tax break in addition to the standard deduction. Married couples who file joint returns can deduct charitable gifts up to $600.

Please take advantage of this “above-the-line” opportunity and join United Way in funding programs that support the health, safety and well-being of the entire Roanoke Valley region. Here is the tax benefit break down for those taking standard deductions, itemized deductions and corporate giving:

Standard Deduction

For people who take the standard deduction, the CARES ACT allows you to take a tax deduction for contributions made to qualified charitable entities up to $300 per year starting in 2020 — this deduction is “above-the-line” for taxpayers who do not itemize their deductions. The 2020 Standard deduction is $12,400 for individuals and $24,800 for married couples filing jointly. Therefore, any donation to qualifying charities of up to $300 will be added to the standard rate of deduction. This deduction applies for 2021.

Itemized Deduction

For people who file for itemized deductions, the CARES ACT allows you to take a tax deduction of up to 100% of your Adjusted Gross Income (AGI) for contributions to qualifying charities in 2021. The new law temporarily lifts the limits on charitable giving from 60% of a taxpayer’s AGI to 100% for 2021.

Corporate Donations

For corporate donors, the CARES ACT continues to allow an entity to take a tax deduction of up to 25% of their Adjusted Tax Income for contributions to qualifying charities in 2021. The new law temporarily lifts the limits from 10% of adjusted taxable income to 25% for 2020

Please note: this new deduction is for gifts that are made to a public charity, such as United Way, and not to a Donor Advised Fund.

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