2021 – a Good Year for Charitable Planning

by | Apr 28, 2021 | charitable estate planning, charitable giving

“It will continue to be more rewarding to give generously in 2021 than it has been in the recent past,” Chris Kissell explains in MoneyTalksNews. That’s because two tax breaks first signed into law last year are available again in 2021:

  1. Taxpayers who do not itemize can deduct up to $300 for qualified charitable contributions (married couples filing jointly may deduct $600).
  2. The cap on deductible donations for itemizers is suspended for 2021.

Caleb Lund and Hayden Adams writing in Investment News, agree. “Despite the ongoing challenges and uncertainty that have carried over into 2021, the environment remains favorable for charitable giving.” The authors name two significant factors favoring charitable donation:

  1. Annual income tax deduction limits for gifts to public charities, including donor-advised funds, are 30% of adjusted gross income for contributions of noncash assets held more than one year or 60% of AGI for contributions of cash.
  2. Donation amounts in excess of these deduction limits may be carried over for up to five tax years.

Donating appreciated non-cash assets offers an additional tax benefit compared to cash donations because clients potentially eliminate the capital gains tax they would otherwise incur if they sold the asset and donated the cash proceeds.

Schwabcharitabe.org discusses “bunching”, which involves combining 2021 and 2022 charitable contributions into this year, then itemizing this year, taking the standard deduction next year. The resulting two-year deduction could be larger than two separate years of itemized deductions.

One proposal by the Biden administration involves reducing the charitable deduction for high income taxpayer from 37% of the value of the gift to only 28%. For this reason alone, at Geyer Law, we are encouraging our clients to be forward-thinking in examining their charitable giving strategy and even accelerating gifts. Those who do not wish to be rushed in choosing charitable recipients may want to use donor advised funds, still claiming the full deduction in 2021.

Charitable trusts have long been an important part of estate planning discussions for clients of our law firm. The goal – helping them reduce the size of their taxable estates while at the same time benefiting causes dear to their hearts. Funding a charitable trust entitles the grantor to remove property permanently from his or her estate and enjoy an income tax deduction for the transfer. We also help clients set up split-interest charitable trusts in which they retain certain interests in property while still providing a benefit to their charities of choice.

At Geyer Law, we believe, 2021 will prove to be an especially good year for charitable planning.

– by Rebecca W. Geyer