It’s the time of year when gift giving is driven more by motivation than obligation. Beyond the heart-warming, though certainly smaller, celebratory gatherings of friends and family, it’s the time of year when nonprofit organizations reach out to supporters and donors – current, past and new – to consider a year-end gift, or investment, in agencies doing so much good work in communities large and small.
Donations and gifts are all the more important this year as nonprofits are attempting to recover from a year rife with fundraising challenges.
A poll conducted this spring by the Alliance of Arizona Nonprofits indicated that total loss of revenue of responding nonprofits was nearly $53 million and that by year end the Alliance anticipates a $433 million overall loss. The ongoing pandemic has, of course, cut revenues but also reduced the number of available volunteers and donors for local nonprofits. This is especially problematic when so many nonprofits face increased demands for services.
TAX DONATION BENEFITS
The Alliance of Arizona Nonprofits emphasizes that the CARES Act for 2021 has extended and expanded several federal tax-donation benefits for those giving to 501(c)(3) public charities.
Universal Deduction for Donations Up to $300 for Individuals or $600 for Joint Filers
For the more than 90% of taxpayers who no longer itemize their charitable giving, the CARES Act for 2021allows individual taxpayers to continue deducting donations to public charities of up to $300 on their 2021 federal tax return, even if they take the standard deduction. Married-filing-jointly taxpayers will get an above-the-line deduction of up to $600.
Raising the Charitable Giving Deduction Cap
For donors who qualify to itemize deductions, and therefore can directly write off gifts to public charities, the deduction cap has been raised from 60% of adjusted gross income to 100% again for 2021.* If the donor gives more than 100% of their adjusted gross income, the donor may carry forward excess deductions for up to five subsequent tax years. Always check with your tax advisor.
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Photo by Joel Muniz on Unsplash
Corporations can deduct charitable donations up to 25% of taxable income, which was previously a 10% limit. This charitable deduction cap increase and universal deductions mentioned in the previous bullet only relate to cash contributions only and not in-kind items such as appreciated assets or other property.
* The deductibility of gifts to 501(c)(3) private foundations is capped at 30% and was not included in this legislation. Family foundations, corporation foundations and private non-operating foundations are excluded, along with supporting organizations under Section 509(a)(3) and Donor Advised Funds. Only cash donations are eligible.
“Donors who typically take the standard deduction have until December 31, 2021 to take advantage of the federal universal deduction benefits. However, donors need to keep in mind that anything above and beyond the federal limit can be considered as a deduction on AZ state taxes,” said Alliance of Arizona Nonprofits CEO Kristen Merrifield.
The State of Arizona provides two separate state tax credits for individuals who make contributions to charitable organizations: 1) for donations to Qualifying Charitable Organizations (QCO) with a maximum of $400 single filers/ $800 joint filers and 2) for donations to Qualifying Foster Care Charitable Organizations (QFCO) with a maximum of $500 single filers/$1000 joint filers. Individuals making cash donations to these charities may claim these tax credits on their personal Arizona State Tax returns. Visit www.azdor.gov/tax-credits for details or to make a donation to a qualifying organization on AZGives.org. Consult a qualified tax advisor for personal tax advice.