How to Maximize Year-End Charitable Giving in 2021

December 3, 2021
Male and female teenage food bank volunteers sort canned food items in cardboard boxes.

The end of the year is rapidly approaching. And while you might be eager to kiss 2021 goodbye, you might not like how fast it’s coming to a close. There are a lot of critical year-end tasks (like maximizing charitable giving!) and considerations for people and businesses.

The end of the year is a busy time. Everyone tends to spend a lot of money in November and December in the United States. Many companies selling goods and services make the most money toward the end of the year, so there’s a lot of demand on the consumer end around this time.

However, the end of the year is also busy because it’s the end of the financial year. For most companies and all individual taxpayers, the last day of December is the cutoff point for all the revenue and expenses reported on the next tax return. Navigating this cutoff point is essential and can have a lot of consequences on your tax situation, whether you end up owing money or receiving a refund. 

You have to account for all of the income you receive before the New Year’s countdown, and if you’re going to claim tax deductions to lower your tax burden with deductible expenses, you need to make those expenses before the end of the year as well. 

One significant deduction is for charitable giving. So as the end of the year approaches, you can get into the spirit of the season with charitable giving and maximize your tax savings at the same time. 

What is the Maximum Amount of Charitable Donations for 2021?

The IRS sets specific limits each year on how much individuals and businesses can deduct when giving to charity. The limits can change year to year and vary according to the type of donation and the organization that receives it. 

Usually, individual taxpayers who itemize their tax deductions can deduct up to 60% of their adjusted gross income with cash donations made to a qualifying public charity under IRS restrictions. 

However, specifically in 2021, this limit has been raised by tax relief legislation around the COVID-19 pandemic. For this year only, individuals can deduct up to a complete 100% of their AGI for qualifying contributions. This is a big opportunity. 

Pandemic tax relief programs extend this chance to taxpayers who claim the standard deduction. Even for those who don’t itemize their deductions, the IRS allows tax deductions of up to $300 in contributions for single individuals or $600 for married individuals filing joint returns. That deduction simply adds to the sizable standard deduction.  

Year-End Strategies to Maximize Charitable Giving

This year gives you a one-time opportunity for massive savings on your taxes with charitable donations. And it’s a win-win situation! You save on taxes, and you get to support the causes that mean a lot to you. 

With charitable donations, you have a chance to redirect a lot of your tax money to do the excellent work you care about. Make sure you take advantage of this opportunity and maximize your allowed donations. Here are a few tips for getting the most out of these deductions this year. 

1. Give a Qualified Charitable Distribution from Retirement Assets

A qualified charitable distribution is a donation to a charity made directly from a retirement savings account like an IRA. This is useful if you’ve hit the age when you must withdraw a required minimum distribution each year, but you don’t need the money. 

Instead of withdrawing money that will count as income when you don’t need it, you can donate your RMD directly to a qualifying charity. You won’t be penalized for not withdrawing money, and you won’t pay taxes on the distribution. 

2. Bunch Charitable Donations

As the standard deduction gets larger, itemizing your deductions and charitable donations in a given year doesn’t always mean the most savings. You have to make a lot of donations to make itemizing worthwhile. 

One strategy for dealing with this is to bunch your donations in a single year. Take everything you plan to donate across a number of years and donate it all in one year to get closer to the cap on charitable giving. This could be especially useful in a year like 2021 when the limit increased. 

Bunching your donations maximizes the benefit you get from itemizing in a single year. Then, you can claim the standard deduction in the other years instead. Bunching some years and claiming the standard deduction in other years can get you higher overall deduction rates over time than if you simply pick one method to use every year. 

3. Consider Giving Non-Cash Assets 

Not all of your charitable contributions have to be made in cash. It requires a little more paperwork from you and the organization that receives the donation, but you can claim tax deductions based on donated goods and property. 

However, regulations on these donations vary depending on the asset’s value. Assets worth more than $5,000 must be appraised by a professional other than the donor or the qualifying charity. 

Some non-cash assets you might donate could include: 

  • A vehicle, whether used or new
  • Real estate
  • Fine art and other collectible items
  • cryptocurrency
  • Shares of stocks, securities, or mutual funds

4. Get a Company Match

Before you write a check, make sure you’re not missing out on any opportunities through an employer. Many companies encourage giving by matching donations made by employees. They set aside a certain amount of money to distribute alongside charitable contributions by individuals, and a lot of this money goes unused. 

If your company offers to match donations, you can use this to effectively double the value of your gift. This is good news for your tax return, and it’s good news for the charity of your choice. 

Maximize Charitable Giving with the Help of 1-800Accountant!

You don’t want to leave money on the table when it comes to tax deductions or charitable donations. Why let money go to waste when it could go to support a nonprofit doing work you truly care about?  

If you want to learn more about taking advantage of these opportunities and maximizing both your deductions and your donations, start working with a professional accountant today. The experts at 1-800Accountant will help you end the year right and make a difference while you’re doing it. 

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.