Charitable Contributions

The Tax Cuts and Jobs Act of 2017 changed charitable giving. Since the standard deduction almost doubled in 2018, it means individual taxpayers, including owners of businesses that are not corporations, have less incentive to give to charities. Generally, if you want to give and get a deduction, you must itemize all charitable deductions, in an effort to getting above the standard deduction amount.

The Consolidated Appropriations Act (CAA) of 2021 maintains and enhances the charitable contributions provisions that were originally created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This means that individual taxpayers who do not itemize can deduct up to $300 of qualified cash contributions on their 2021 tax return as an above-the-line deduction (the deduction is $600 for joint filers). The CAA also temporarily extends the provision that allows taxpayers who itemize to deduct up to 100% of AGI for qualified contributions (rather than the usual 60%).

C corporations with excess inventory may donate surplus property to charitable organizations and receive a tax deduction. For example, if you contribute food or medical supplies to a charity that provides for the homeless, you may deduct not only the cost of the goods, but also half of the lost profit (not to exceed twice the cost). For 2021, corporate contribution deductions are limited to 25% (normally 10%) of the corporation’s taxable income before considering the donation.