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The income tax charitable deduction was introduced in 1917 and the estate tax charitable deduction in 1921. The charitable deduction depends on the asset(s) donated and the type of recipient (Toce, Abbin, Pace, and Vorsatz 2020). Donors claim the greater of the standard deduction and the sum of itemized deductions, including the charitable deduction. As a result, most taxpayers do not itemize in order to claim a charitable deduction. However, gifts of appreciated assets that are worth more at the time of the gift than when purchased (cost basis) escape capital gains tax if donated in‐kind to and sold by a charity.

The following summarizes the income tax benefits and annual limits of charitable gifts. The deduction is available for the year of the gift and up to five more years to carry‐over excess deduction each year.

Gifts to public charities by individuals:

 Cash gifts: Limited to 60 percent of Adjusted Gross Income (AGI)/100 percent in 2020 and 2021.

 Cash gifts in 2020 and 2021 also qualified for a universal above‐the‐line deduction of $300 single or $600 married (2021 only).

 Long‐term noncash gifts: Limited to 30 percent of AGI for fair market value (FMV) or 50 percent for cost basis.

 Short‐term noncash gifts: Limited to 50 percent of AGI for cost basis of the gift.

 Ordinary income/Tangible property for unrelated use: Limited to 50 percent of AGI for cost basis of the gift.

Gifts to public charities by corporations:

 Cash gifts: Limited to 10 percent of Taxable Income/25 percent in 2020 and 2021.

 Gifts of food inventory for the needy: Limited to 15 percent of Taxable Income/25 percent in 2020 and 2021.

Gifts to private foundations by individuals:

 Cash gifts: Limited to 30 percent of AGI.

 Long‐term noncash gifts: 20 percent of AGI for fair market value (FMV) for public stock only/cost basis for other assets.

 Short‐term noncash gifts: Limited to 30 percent of AGI for cost basis of the gift.

 Ordinary income: Limited to 30 percent for cost basis of the gift.

 Tangible property for unrelated use: Limited to 20 percent of AGI for cost basis of the gift.