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Tax Incentives for People to Give to Charity

The $900 Billion Relief Package signed into law this past December created multiple opportunities to benefit the nonprofit community this year. Below is a brief synopsis with key highlights on some of the provisions of the new stimulus package.

  1. An expansion of the universal charitable deduction for cash gifts

The stimulus package raised the cap on the Universal Charitable Deduction (UCD) from a flat $300 for 2020 (passed as part of the first major Coronavirus Relief Package in March 2020) to $600 for married couples filing jointly and $300 for individuals for 2021. This deduction is "above the line" which means that a taxpayer does not have to itemize in order to claim the deduction. This tax incentive is available for cash gifts to qualified charities (but not to supporting organizations or donor advised funds).

  1. An extension of the cap on deductions for cash contributions

Contributions to public charities are generally limited to a percentage of a taxpayer’s adjusted gross income (AGI). The CARES Act lifted the cap on annual contributions for those who itemize, increasing it from 60% to 100% of AGI for 2020 (and now for 2021). Any excess contributions available can be carried over to the next five years. For corporations, the law raised the annual limit from 10% to 25% of taxable income.

  1. Paycheck Protection Program (PPP) Loans

The new law expands the Paycheck Protection Program. These loans may be forgivable if certain criteria are met. It gives those who have not yet applied for forgiveness the opportunity to spend proceeds on four new types of expenses. Special rules apply for those who have already borrowed and used their original PPP proceeds.

Suggested Ideas on How to Communicate these Important Provisions to Your Donors

  • Connect With Your Donors Via a Phone Call
    • Let them know they may be able to increase their giving in 2021 (and take a deduction) by taking advantage of the universal deduction.
  • Consider a Mini Campaign on Social Media
    • Encourage your donors to use their tax-deductible contribution to benefit your organization. Perhaps you can promote it around a certain event such as an anniversary or another milestone. The impact can be even greater if a donor’s employer matches the gift. Follow up with an impact story or highlight the total giving numbers (both in number of donors and dollar amount) on social media to show how even a small gift can make a big difference.
  • Change Your Email Signature Line
    • Just below or above your name, add a short message about these tax incentives, such as “New for 2021: Deduct up to $600 for cash gifts” or “Thinking of making a cash gift this year? Contact me to learn more about the renewed and expanded tax incentives for 2021.”

 

Questions regarding the new tax incentives? Do you need help connecting with your member of Congress?  Our Chapter's Government Relations Committee can help. 

Email:  [email protected]

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