Take Advantage of the CARES Act
Act now to take advantage of tax benefits under the The Coronavirus Aid, Relief, and Economic Security (CARES) Act to increase your charitable giving in 2021 and beyond to Pratham.
This year, there is a unique opportunity for you to increase your charitable giving beyond the normal allowed deductible amounts (from 60% to 100% of your Adjusted Gross Income, or AGI), by structuring your gifts as cash gifts to a public charity, like Pratham.
Normally, deductible cash gifts made to public charities cannot exceed 60% of your AGI. This year, cash gifts made to public charities can be used to increase your allowable charitable giving to equal 100% of your 2021 adjusted gross income (not applicable to cash gifts made to “Donor Advised Funds or DAFs”).
This temporary increase in the allowed deduction for cash gifts allows you to increase your charitable giving in 2021. It is also an opportunity to front load future gifts into your 2021 charitable giving that may have otherwise been spread over several years. This means that you can make a gift in 2021 which will be credited to your giving over coming years (i.e. in 2022 and 2023).
The following simple example illustrates the charitable giving opportunity
- For a taxpayer with an AGI for 2021 of $200,000, the normal maximum allowed amount of cash gifted to charity would be 60% or $120,000 in this example. During 2021, this AGI limit is temporarily increased to 100% for gifts made to public charities, such as Pratham. Thus, in this example, the allowable amount can be $200,000 for cash gifted to a public charity in 2021.
This opportunity exists for you to “top off” your 2021 giving so that your total charitable gifts, (after considering all types of giving), reaches 100% of your AGI thru the use of cash gifts.
To take advantage of this increased deduction, you should act soon and make an election on your 2021 Form 1040 to use this increased deduction limit. Please note that this opportunity expires at the end of 2021
Please note that the application of these rules gets more complex if your 2021 giving includes gifts of appreciated long term capital gain property and we encourage you to consult your personal tax advisor.
You should consult with your personal tax advisor as soon as possible to learn more about increasing your charitable deductions this year. Pratham will be pleased to work with you and your advisors to accomplish your giving goals.
For further information, please read this article prepared by RSM US, LLP, Pratham’s U.S. income tax accountants.
- There are annual limits placed on the deductibility of charitable contributions for U.S. tax purposes, and these limits are tied to a percentage of the taxpayer’s “adjusted gross income” (AGI).
- Normally, deductible cash gifts made to public charities cannot exceed 60% of your AGI.
- Gifts of certain appreciated property, like securities held greater than one year, which if sold would produce a capital gain, are limited to 30% of your AGI when donated in kind to public charities. There are different percentage limits for gifts of cash or publicly traded stocks to private foundations, which are generally smaller in amount.
We recommend that you consult with your personal tax advisor to find out how this increased limit might factor into your tax planning for 2021 and future years. Pratham cannot give you tax planning advice and this discussion should not be interpreted as such.