Corporate Limit On Charitable Contributions Increased To 25% Of Taxable Income
The law now permits C corporations to apply an increased limit (Increased Corporate Limit) of 25% of taxable income for charitable contributions of cash they make to eligible charities during calendar-year 2021.
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Normally, the maximum allowable deduction is limited to 10% of a corporation’s taxable income.
Again, the Increased Corporate Limit does not automatically apply. C corporations must elect the Increased Corporate Limit on a contribution-by-contribution basis.
Increased limits on amounts deductible by businesses for certain donated food inventory
Businesses donating food inventory that are eligible for the existing enhanced deduction (for contributions for the care of the ill, needy and infants) may qualify for increased deduction limits.
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For contributions made in 2021, the limit for these contribution deductions is increased from 15% to 25%.
For C corporations, the 25% limit is based on their taxable income.
For other businesses, including sole proprietorships, partnerships, and S corporations, the limit is based on their aggregate net income for the year from all trades or businesses from which the contributions are made.
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A special method for computing the enhanced deduction continues to apply, as do food quality standards and other requirements.
Keep good records
The IRS reminds individuals and businesses that special recordkeeping rules apply to any taxpayer claiming a charitable contribution deduction.
Usually, this includes obtaining an acknowledgment letter from the charity before filing a return and retaining a cancelled check or credit card receipt for contributions of cash.
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For donations of property, additional recordkeeping rules apply, and may include filing a Form 8283 and obtaining a qualified appraisal in some instances.
Your Tax Pro On Demand,
R Clyde Olivieri, Jr.
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