The pandemic sparked charitable giving among wealthy families, and some who are eager to give more may score a bigger 2021 write-off by leveraging money from pretax retirement accounts.
Here’s how it works: Certain retirees with excess pretax retirement savings — meaning they’ve saved more than they expect they’ll need — may withdraw the funds and donate the cash to a qualified charity. There are taxes on the distribution, but retirees may offset some levies with a higher charitable deduction.
Donors may claim a tax break of up to 100% of their adjusted gross income for cash donations in 2021, a CARES Act measure meant to boost charitable giving during the pandemic.
However, they must itemize deductions to claim the write-off, meaning their total tax breaks exceed the standard deduction, which is $12,550 for individuals and $25,100 for married couples filing together for 2021.