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As a result of the coronavirus pandemic, we saw an expansion of tax incentives for donors with the goal of assisting nonprofits and their communities. The Coronavirus Aid, Relief and Economic Security Act passed in March 2020 provided an above-the-line deduction for both single and married taxpayers of $300.
This was extended and increased with the passing of the Consolidated Appropriations Act in December of 2020, which provided a more generous $600 above-the-line charitable deduction for gifts made in 2021.
As we near the halfway mark of the 2021 tax year, there have been bipartisan discussions on whether to extend these benefits to taxpayers who do not itemize. Proposals for expanding the tax breaks continue to focus on addressing the economic fallout from the pandemic while also allowing a deduction for working families that claim the standard deduction and would typically not benefit from a tax perspective.
One of the proposed bills titled the Universal Giving Pandemic Response and Recovery Act (S. 618), which was presented by Sen. Chris Coons, D-Del. and Sen. James Lankford, R-Okla., proposes to raise the above-the-line charitable deduction to one-third of the standard deduction for 2021 and 2022. This would increase the cap to approximately $4,183 for single taxpayers and $8,367 for married taxpayers in 2021.
Lawmakers are also reviewing other ways to expand charitable giving incentives such as the cap of 60% of adjusted gross income for taxpayers who itemize that is set to expire and revert back to 50% after 2025.
The tax professionals at Schneider Downs continue to monitor these discussions, but if you have any questions on the current law, please contact Schneider Downs.