CARES Act

CARES Act Tax Incentives Extended - With a Small Boost

How $300 from every donor could make a big difference!

A couple of key provisions of the CARES (Coronavirus Aid, Relief, and Economic Security) Act were extended into the new year (and, in one case, increased). Here’s what the new stimulus package means for you in 2021.

Tax Incentives When You Give to Charity:

  1. An expansion of the universal charitable deduction for cash gifts – The universal charitable deduction has not only been extended but given a well-deserved upgrade. The new deduction is $300 for single filers and $600 for married couples filing jointly. This is available to taxpayers who take the standard deduction. This tax incentive is available for cash gifts to qualified charities, like LM (but not to supporting organizations or donor advised funds).
  2. An extension of the cap on deductions for cash contributions – Contributions to public charities are generally limited to a percentage of a taxpayer’s adjusted gross income (AGI). The CARES Act lifted the cap on annual contributions for those who itemize, increasing it from 60% to 100% of AGI for 2020 (and now for 2021). Any excess contributions available can be carried over to the next five years. (For corporations, the law raised the annual limit from 10% to 25% of taxable income.)

Contact Jon Heinly at heinlyjd@lancastermennonite.org or (717) 740-2425 to learn more about the renewed and expanded tax incentives for 2021.

The Educational Improvement Tax Credit (EITC) is a state program that allows eligible businesses to receive up to a 90% tax credit on contributions to an ETIC scholarship organization. In 2014, Pennsylvania’s EITC legislation was amended to allow certain individuals (rather than only businesses) to participate in the EITC tax credit program through what is called a Special Purpose Entity (SPE). Mr. Randy Tarpey, an accountant from Tyrone, PA, is the manager of an SPE called the Children’s Jubilee Scholarship #1 LCC. This SPE has been granted a significant amount of tax credits from the state that he is looking to distribute to private schools in central PA. Lancaster Mennonite School has an opportunity to fully fund our needs-based scholarship by maximizing this EITC capacity.

Consultation with a financial advisor is important for providing interpretation and recommendations based on the unique position of each taxpayer and business.