Extended Expiring Tax Breaks

Late in 2020, Washington extended many temporary tax provisions as part of the Consolidated Appropriations Act, 2021. A few extensions that may affect your personal income taxes are summarized here.

Charitable Contributions

The suspension of the AGI limit on cash contributions is extended through 2021.

If you itemize deductions, the maximum amount you can deduct per year for cash contributions to charity is normally limited to 60% of your adjusted gross income (AGI).

In March 2020, the CARES Act temporarily suspended the limit for cash contributions made in 2020, making it possible for taxpayers to deduct qualified contributions of up to 100% of their AGI in a single year. This was done to encourage individuals to support their favorite charities during the COVID-19 pandemic.

The Consolidated Appropriations Act extends the suspension of the limit to include cash contributions made in 2021.

The charitable deduction for taxpayers who claim the standard deduction is extended through 2021.

Taxpayers who claim the standard deduction can deduct up to $300 ($600 if married filing jointly) of the cash contributions they make in 2021.

Normally, only those taxpayers who itemize deductions can deduct their charitable contributions. The CARES Act changed that for 2020 by allowing taxpayers who claim the standard deduction to deduct up to $300 of the cash contributions they made in 2020.

The Consolidated Appropriations Act extends this tax provision through 2021 and increases the maximum amount that married taxpayers who file jointly can deduct in 2021 to $600.

Energy Efficiency

The tax credit for adding energy-efficient windows, doors, insulation, and more is extended through 2021.

The Nonbusiness Energy Property Tax Credit has been set up to expire at the end of 2020, but the Consolidated Appropriations Act extends it through 2021.

This credit has a lifetime limit of $500 (no more than $200 for windows) and can be claimed for adding windows, doors, insulation, roofs, water heaters, and heating and cooling systems that meet certain energy standards to your existing main home.

The tax credit for adding alternative energy equipment to your home is extended through 2023.

The Residential Energy Efficiency Property Credit, which had been set to expire at the end of 2021, is now extended through 2023.

This provision allows you to claim a tax credit for part of the cost of adding qualified solar, geothermal, wind, and fuel cell equipment to your existing home or your new home that is being constructed.

And beginning in 2021, the list of expenditures eligible for this credit is expanded to include qualified biomass fuel property.

Please consult with us for more details and advice regarding the extended tax provisions. With offices in Rutland and Williston, Vermont Copper Leaf Financial develops a customized wealth management plan designed to integrate every aspect of your financial life. Our approach is to provide clarity and calm amidst the chaos. Where there is uncertainty, we look for facts. We call our approach evidence-based investing. Call us today at 802-878-2731 to schedule a strategy session and begin building your road map to financial success.

Article published in March 2021 edition of Eye on Money. If you would like to be added to our mail list please email jennifer@dh-cpa.com.