Charitable tax deductions expiring in 2021!

By Brian S. Lavoie

Year-end giving season is almost here.  The selflessness of donating to charity can feel amazing, knowing that you are making the world a better place.  Handled strategically, philanthropic giving can also result in meaningful tax savings.  Whether you want to donate cash or property worth $300, $3,000, or $3 million to your favorite charity (like Piscataquog Land Conservancy), there are opportunities that are expiring at the end of 2021 — and time is running out!

1. The first opportunity that expires in 2021 is for everyone. Normally, to deduct charitable contributions you must itemize your deductions. The problem is that fewer than 10% of New Hampshire residents benefit from itemizing – so they don’t! However, in 2021 you do not need to itemize to deduct up to $300 in charitable donations ($600 if married filing jointly). This opportunity ends on December 31st, 2021, so use it or lose it!
2. The next opportunity is for anyone over the age of 70 ½ who has an IRA. Normally all withdrawals you take from your IRA are taxable as income. However, there is a special rule that allows you to send distributions directly from your IRA to charity and avoid taxation altogether, up to $100,000. This can include required minimum distributions (RMDs) that you normally MUST take out and pay taxes on. This income never shows up on your tax return, so no itemization is required! While this strategy continues past 2021, this year’s opportunity will not, so it can still be considered a “use it or lose it” situation.
3. The final opportunity is also ending in 2021 and is perfect for the person with a large estate who intends to make gifts of more than $100,000 now or in the future. When making a substantial gift, philanthropists may run into a roadblock when taking a deduction – that deduction may be limited to as little as 20% of their adjusted gross income (AGI). However, in 2021 cash donations to public charities like the PLC can be fully deductible up to 100% of AGI. This can be an incredible estate planning tool for anyone affected by increasing income and estate taxes. This opportunity ends on December 31st 2021, and you’ll want to act soon to meet the deadline.

It’s worth noting that making large gifts does not have to result in disinheriting your family! There are ways to make sure that both they and your favorite causes benefit from your success and generosity. Proper planning is the key.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.