Some charities may receive a small tax benefit for charitable giving for 2021

Some charities may receive a small tax benefit for charitable giving for 2021

Expected increase in depreciation for charitable donations in 2021? Tax experts say the deduction will not look like it was in 2020.

As the pandemic ravaged American lives, Congress added a provision to the CARES Act for more charitable giving: an improved tax deduction in 2020 for cash donations up to $ 300.

In 2020, single or joint tax filers can claim an “over the line” deduction of $ 300 on their tax return, which means they received benefits whether or not they itemized the deductions.

When lawmakers extended benefits until 2021, they increased the deduction to $ 600 for couples filing together, and many expected the tax break to work the same as in 2020.

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However, tax professionals have recently noticed a change. Charitable write-off is no longer the first line, but neither is it an itemized deduction. This is in line with the 2021 draft form that taxpayers use to file their returns.

“It is a deduction which does not affect [adjusted gross income]said Jeffrey Levine, CPA, chartered financial planner and planning director of Buckingham Wealth Partners in St.

Levine said the above charitable deduction for 2020 reduces adjusted gross income, among other possible consequences, such as reducing their taxes on Social Security payments or reducing Medicare Part B premiums.

However, the 2021 write-off will not affect adjusted gross income and could negatively impact a single taxpayer with lower income in 2020, Levine said.

“For single filers, it’s not a win,” Levine said. “They’re in the same condition at best, but they couldn’t be better than last year.”

For sole filers, this is a non-winner.

Jeffrey Levine

Director of Planning Buckingham Wealth Partners

Still, as the IRS has adjusted gross income from the child tax credit to income-tested student loan payments, the 2021 changes could be a wash for anyone in the middle income bracket.

However, married taxpayers who file together can be for better or for worse, Levine said.

“for most people [who are married filing jointly]”I doubt it’s better,” he said. “But of course there will be extreme cases where it’s absolutely harmful.”

For example, a couple on the edge of the income cutoff may have to pay higher Medicare Part B premiums for 2023. (Medicare Part B bases premiums on adjusted adjusted gross income from two years ago.)

While the deduction may be less beneficial for some taxpayers, Levine doesn’t expect it to affect charitable donations until 2021.

Historically, taxpayers have seen two types of deductions: the top line, affecting adjusted gross income, or the bottom line, which tax filers must itemize in order to claim.

But charitable deductions for 2021 fall into the third category “in the middle,” Levine said.

A more recent example is the tax breaks for qualified business income, a write-off for certain middle-tier businesses added by the Tax Cuts and Employment Act of 2017.

“It’s really begging: is it new to our legislators now? said Levine.

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