Charitable donations tax deduction limit 2021

Charitable donations tax deduction limit 2021

The charitable donations tax deduction limit for 2021 contains provisions that enable businesses to help those in need. It also helps by claiming certain deductions against their tax bills. The CARES Act, together with the stimulus package signed into law at the end of 2020, makes several provisions in regard to charitable tax incentives. Are you planning your income, expenditures, and taxes for this year?  You should take careful note of the CARES Act and its stipulations. This will keep you informed of charitable donations tax deduction limits for 2021.  

How much can you deduct from charitable donations for 2021?

The CARES Act and the stimulus package allow for deductions of up to 100% of your adjusted gross income (AGI). This applies to cash contributions made in 2021. If you are itemizing your charitable donations, you can receive this deduction.

Also, the CARES Act allows for other deductions if you are not itemizing your cash contributions. It allows for an additional, “above-the-line” deduction for charitable gifts made in cash of up to $300. This provision is extended into 2021 for taxpayers filing separately. Plus, it increases the deduction to $600 for taxpayers filing jointly. 

Contributions to Donor-advised Funds

No changes have been made to existing deductions for contributions made to a donor-advised fund sponsor like Fidelity Charitable. So, you can still deduct up to 60% AGI in cash. Or, you can deduct up to 30% AGI in appreciated assets contributed to a donor-advised fund. Also unchanged are rules around Qualified Charitable Distributions (QCD). Surprisingly, these allow seniors over 70½ years of age to donate up to $100,000 in IRA assets directly to charity annually. Meanwhile, these donations of IRA assets would not count toward the distribution of taxable income.

Need help managing your charitable donations for 2021?

The assistance of an experienced certified public account (CPA) can help you manage your taxes, including the charitable donations tax deduction limit for 2021. Georgen Scarborough is a firm of CPAs based in Vienna, Virginia. Contact us if you need help with your taxes.

Year-end transactions to boost your tax refund

year-end transactions to boost your tax refund

As the end of the tax year approaches, it is probably time to start thinking about year-end transactions to boost your tax refund. Of course, it is a good idea to manage your income and expenditures throughout the year in such a way as to ensure the best possible tax breaks. However, when you come towards the transition from one year to another, it is important to time your transactions carefully so as to lower your tax bill. Here are some tax refund tips to help you. 

Lower your tax bill with careful timing

It is possible to minimize taxes year-to-year by making certain payments at just the right time. It is important to know when to make payments to increase expenses and tax deductions and push receipts to create income at the end of the tax year. As a rule of thumb, you want to move income into a year of lower taxes and move expenses into a year of higher taxes. 

Timing payments at year-end

The usual strategy for a small business is to lower the current year’s taxes by deferring income and prepaying expenses. However, this may not be the right path for everybody. If you are going to be in a higher tax bracket for the following year, then it might make sense to take the opposite approach. 

Expenses that can lower your tax bill 

If you are looking for some readily available ways to decrease your tax liability for the current year, you can consider making some or all of the following expenditures, which you can deduct against your income taxes.

  • Deductible gifts and donations
  • Purchase assets – you can deduct against the depreciation on these assets
  • Pre-pay some of the next year’s expenses. That way, you can deduct the expense for the current tax year.

You can also delay income to next year so that you are not liable to be taxed on it in the current tax year. This does not mean receiving a check and then only cashing it next year – you have still received that payment. The way to delay income is to hold off on sending bills to clients until the start of the next tax year.

The assistance of an experienced certified public account (CPA) can help you lower your tax liability easily and legally. Georgen Scarborough is a firm of CPAs based in Vienna, Virginia. Contact us if you need tips on year-end transactions to boost your tax refund.