The federal government is opening its wallet with a $900
billion coronavirus rescue package aiming to prop up faltering businesses and
The freshly-passed bill also extends and enlarges tax incentives so that people will open their wallets to make charitable donations in 2021.
The CARES Act in March established what’s called a “universal charitable deduction” for 2020. Come tax season, that will let taxpayers take the standard deduction and then also take a deduction for charitable contributions up to $300. And they don’t have to go through the hassle of itemizing to get that deduction.
The new rescue package, which passed Monday night in the House of Representatives and the Senate, extends the universal charitable deduction through 2021.
What’s more, the new bill will let married couples deduct up to $600 above the line for their 2021 donations. This year, the same $300 “above-the-line” deduction applied for both individuals and married couples.
Contributions to nonprofits are generally tax deductible, but traditionally, the deductions only start shaving down tax bills when a person makes itemized deductions.
The thing is, the majority of taxpayers opt for the standard deduction because it makes better financial sense for them. In the upcoming tax season, the standard deduction will be $24,800 for married couples and $12,400 for individuals.
Past calculations show there can be small tax bill reductions when using the above-the-line deduction, like $66 off the income tax liability of a household making $100,000. But for many, charitable donations aren’t propelled by tax strategy, especially at such a dire time.
In a year when their services have been in demand more than ever, it’s been a wildly up-and-down ride for nonprofit organizations eyeing their balance sheets, observers have previously told MarketWatch.
Since March, charitable nonprofit organizations have shed nearly one million jobs and “thousands” of organizations are now permanently shuttered, Tim Delaney, CEO of the National Council of Nonprofits, said Monday.
Data from Giving Tuesday, an initiative encouraging people to donate on the Tuesday after Thanksgiving, said Americans donated $2.47 billion during this year’s Giving Tuesday, a 25% increase from the year earlier.
Charities and nonprofit organizations “can nod appreciation for the positive direction of some aspects” of the new stimulus package, Delaney said in a statement Monday. The universal charitable contribution’s extension was one such example, he noted.
The bill is “a critical temporary measure,” Delaney said, “but it fails to do enough to protect the nation’s charitable nonprofits — the organizations that tens of millions of Americans have been relying on for essential supports such as shelter, food, mental health services, and childcare.”
For example, Delaney said, rules surrounding the next round of cash in the Paycheck Protection Program may shut out mid- and large-sized organizations and turn away organizations that stayed afloat because of their first round of PPP funding.