CARES act change to 2021 charitable giving deduction

[hooplady]

https://www.fidelitycharitable.org/articles/what-the-cares-act-means-for-charitable-giving.html#:~:text=The%20adjusted%20gross%20income%20(AGI,prior%20to%20the%20CARES%20Act).

"For cash contributions made in 2021, you can elect to deduct up to 100 percent of your AGI (formerly 60 percent prior to the CARES Act)."

Yes, I know for the average person this isn't a significant change. But for some mustachians it might be an interesting way to leverage deductions in order to affect taxable income.

For me, since the whopping increase in the standard deduction a couple years ago I haven't even bothered to itemize. However with the change in political control I'm guessing this might revert to previous levels, making itemizing attractive again. And 2021 brings us a completely new animal - a chance to significantly increase charitable contributions for one year.

I'm looking at perhaps making a one-time contribution to an organization that could really impact their operations this year, then go back to moderate contributions in 2022 if the standard deduction is still elevated.

Thoughts?

[Fomerly known as something]

Or you can fund a DAF (donor advised fund) if you want to keep spreading out donations in the future.

[hooplady]

Or you can fund a DAF (donor advised fund) if you want to keep spreading out donations in the future.

I've been looking at that as well.

[hooplady]

Or you can fund a DAF (donor advised fund) if you want to keep spreading out donations in the future.

I've been looking at that as well.

So I've been researching this, and I have a couple of concerns:
1) One source indicated that the average time between donation and funding to the charity of my choice was 24 months. In my specific case, that's a no-go - they need the funds for a specific need much sooner than that.
2) While I see that I can direct my donation to be disbursed to a charity of my choice in the timeline I select, I'm not seeing that I can really limit the use of the funds. If I have a very specific reason that I want the non-profit to utilize my funds, is that within the "Donor-Advised" parameters?

[Fomerly known as something]

I know vanguard does allow you to designate specific projects.  Also time to disburse for that smaller grants I’ve given is “real time” basically.  I’m wondering if the 24 months is the average time people take to donate after starting a DAF vs the amount of time for a grant to be sourced.

[hooplady]

My goal for this particular post was simply to let other Mustachians know about the opportunity provided by the CARES Act for 2021.

In the short-term, I think I may need to work with the specific non-profit I have in mind to accomplish what I'd like to see this year. In the bigger picture, Donor-Advised Funds may indeed play a role 2021 deductions and what I want to do long-term.




.

[dandarc]

Thanks - glad to see this and the above-the-line deductions were extended another year.

[seattlecyclone]

Be aware that the higher deduction limit is not available for contributions to donor advised funds. You need to give cash directly to an operating charity to claim this.

[Dicey]

Or you can fund a DAF (donor advised fund) if you want to keep spreading out donations in the future.

I've been looking at that as well.

So I've been researching this, and I have a couple of concerns:
1) One source indicated that the average time between donation and funding to the charity of my choice was 24 months. In my specific case, that's a no-go - they need the funds for a specific need much sooner than that.

I have a DAF at Fidelity and it takes a week at most. Some charities are set up for electronic funds transfer and it only takes a day or two.

2) While I see that I can direct my donation to be disbursed to a charity of my choice in the timeline I select, I'm not seeing that I can really limit the use of the funds. If I have a very specific reason that I want the non-profit to utilize my funds, is that within the "Donor-Advised" parameters?

I saw this on your other thread and posted some thoughts there. Short version: You can make specific arrangements before you donate the money.

[Dicey]

Be aware that the higher deduction limit is not available for contributions to donor advised funds. You need to give cash directly to an operating charity to claim this.

Hmmm, I was going to add a small slug o'cash to top up my existing DAF this year. Does this mean it would make more sense (for 2021 only) to just give directly to my charities? LOL, I fully expect the answer might be, "It depends", but I just thought I'd ask in case the answer is obvious.

[Fomerly known as something]

Be aware that the higher deduction limit is not available for contributions to donor advised funds. You need to give cash directly to an operating charity to claim this.

Hmmm, I was going to add a small slug o'cash to top up my existing DAF this year. Does this mean it would make more sense (for 2021 only) to just give directly to my charities? LOL, I fully expect the answer might be, "It depends", but I just thought I'd ask in case the answer is obvious.

Hmm and cash, so Does that mean no appreciated securities.  As I still have my W2, I don’t keep 100% of my salary in cash as that would be too much.  I’m not sell enough securities (taxable event) to donate that much.

[dandarc]

Be aware that the higher deduction limit is not available for contributions to donor advised funds. You need to give cash directly to an operating charity to claim this.

Hmmm, I was going to add a small slug o'cash to top up my existing DAF this year. Does this mean it would make more sense (for 2021 only) to just give directly to my charities? LOL, I fully expect the answer might be, "It depends", but I just thought I'd ask in case the answer is obvious.

Limit on deductibility of cash donations to DAF remains at 60% of AGI, and of course you can carry forward for 5 years if you exceed that. Guess it depends on how small the slug o'cash is relative to your AGI.

[Dicey]

I was only thinking about 5k in cash, plus about 6.5k in highly appreciated securities, so we should be fine.

And yeah, we keep plenty of cash available, because we like to make ugly houses safe and pretty again. $5k in cash is chump change, thanks to a decade of mustachianusm, lol. MPP indeed.

[seattlecyclone]

Be aware that the higher deduction limit is not available for contributions to donor advised funds. You need to give cash directly to an operating charity to claim this.

Hmmm, I was going to add a small slug o'cash to top up my existing DAF this year. Does this mean it would make more sense (for 2021 only) to just give directly to my charities? LOL, I fully expect the answer might be, "It depends", but I just thought I'd ask in case the answer is obvious.

Limit on deductibility of cash donations to DAF remains at 60% of AGI, and of course you can carry forward for 5 years if you exceed that. Guess it depends on how small the slug o'cash is relative to your AGI.

Right, and the limitation on donation of securities remains at 30%. Strangely if you donate only cash you can deduct 60% but if you donate a combination of cash and securities the limit is 50%.

Regardless, you probably don't actually want to deduct a full 100% of your AGI in one year. If you have any other itemizable deductions such as state tax and mortgage interest, you could see your itemized deductions exceed your AGI. If you had business income you might be able to claim a net operating loss, but otherwise you get no benefit from the deduction in excess of your AGI. Even before you get there you'll be taking deductions against very low bracket income (perhaps 0% income if you had capital gains).

The regular rules actually seem more advantageous because once you hit that 60% mark you're likely to benefit more by carrying the rest of that donation over to the next year than from continuing to subtract it from low-bracket income.

[dandarc]

I think a more valid use of the new AGI limit (probably not all the way to 100% of AGI, but possibly could make sense to donate above 60% of AGI) would be if you're contemplating a very large cash donation originating from a retirement account - if you're old enough able to make qualified withdrawals from retirement accounts, there is no limit on deducting donations from an IRA or 401K to your chosen charity this year. Normally you've got that $100K qualified charitable donation limit, then the regular AGI limit (I'm unclear how these might interact for a retiree).

Side note - we're confirming and having to coordinate with our payroll provider which has been more of an adventure than I'd like, but it looks like the church actually did come in under 80% of 2019 for first quarter - hurray for Q1 & Q2 2021 employee retention credit and many, many thanks to @seattlecyclone on that one.

[seattlecyclone]

Side note - we're confirming and having to coordinate with our payroll provider which has been more of an adventure than I'd like, but it looks like the church actually did come in under 80% of 2019 for first quarter - hurray for Q1 & Q2 2021 employee retention credit and many, many thanks to @seattlecyclone on that one.

Good for you! My non-profit preschool seems to have just squeaked under the 80% mark last quarter as well, and I didn't even have to do anything crazy like deferring my own kid's tuition payments until April 1. The feds will therefore be covering 70% of our payroll for the first half of the year at least.

[dandarc]

Side note - we're confirming and having to coordinate with our payroll provider which has been more of an adventure than I'd like, but it looks like the church actually did come in under 80% of 2019 for first quarter - hurray for Q1 & Q2 2021 employee retention credit and many, many thanks to @seattlecyclone on that one.

Good for you! My non-profit preschool seems to have just squeaked under the 80% mark last quarter as well, and I didn't even have to do anything crazy like deferring my own kid's tuition payments until April 1. The feds will therefore be covering 70% of our payroll for the first half of the year at least.

So, it turns out that we had a check arrive in March that (I think at the donor's request if that matters) was not deposited until April. Large enough that it makes the difference between being over or under 80% of 2019 Q1. So, question is - was that check received or not?

[seattlecyclone]

Side note - we're confirming and having to coordinate with our payroll provider which has been more of an adventure than I'd like, but it looks like the church actually did come in under 80% of 2019 for first quarter - hurray for Q1 & Q2 2021 employee retention credit and many, many thanks to @seattlecyclone on that one.

Good for you! My non-profit preschool seems to have just squeaked under the 80% mark last quarter as well, and I didn't even have to do anything crazy like deferring my own kid's tuition payments until April 1. The feds will therefore be covering 70% of our payroll for the first half of the year at least.

So, it turns out that we had a check arrive in March that (I think at the donor's request if that matters) was not deposited until April. Large enough that it makes the difference between being over or under 80% of 2019 Q1. So, question is - was that check received or not?

¯\_(ツ)_/¯

I'm no expert in bookkeeping/accounting rules in this area. During COVID I've been making infrequent bank deposits to limit exposure, and our preschool's bookkeeper seems to recognize revenue based on when the checks are deposited. Your bank records will also show the deposit date. Whether that's technically the correct treatment or not, what are the odds the IRS digs deeper than that?