The Season of Giving: Understanding Charitable Gift Deductions
The holiday season is a time when many people take an opportunity to give. Whether it’s to your church, an education-related Foundation or other charitable organization, so long as the organization has tax-exempt status, your gift can qualify for tax benefits.
What Types of Organizations Qualify as Charitable?
If you’re unsure what type of organizations qualify, note that non-profit eligible entities typically operate for religious, scientific, poverty mitigation or educational purposes, and/or have a purpose to prevent cruelty of protected or vulnerable groups. The IRS provides a search tool to help verify an organization’s tax-exempt status and determine its eligibility for deductible contributions. (Remember, gifts that benefit a particular individual, business or private interests do not qualify as deductible contributions.)
Changes to Charitable Giving Deductions
Last year, the IRS temporarily allowed individuals to deduct $300 per person (up to $600 for married filing jointly) without itemizing other deductions. Unfortunately, in 2022, charitable contributions can only be deducted if you itemize expenses on Schedule A of your tax return. For that to make sense, all your itemized expenses must exceed the standard deduction. Additionally, other charitable contribution deduction provisions made as part of COVID relief in the 2020 and 2021 tax years are no longer available. Specifically, the deduction for cash contributions to public charities is no longer up to 100% of adjusted gross income for people who itemize. The 2022 rules have reverted back to allowing no more than 60% of your adjusted gross income for cash contributions to most public charities, and the limit is 30% for non-cash donations.
What Type of Documentation is Needed?
For cash contributions, you’ll need the name of the organization and the donation amount; a bank or credit card statement that illustrates the amount of the contribution and the date of the donation; and for gifts over $250, a receipt from the charitable organization is also required.
Plan Ahead
In addition to documenting the charitable donations you have made this year and working with your tax advisor to determine whether the using standard deduction, or itemizing deductions will be the best option for your 2022 tax return, it’s important to plan ahead. Start thinking now about your charitable contribution goals and associated tax implications for 2023. Make sure you know what tax bracket you’ll fall into next year, if you plan to file individually or jointly, the associated deduction limits, and the types of assets you can donate.
We are Here to Help.
The team at Brock CPA is here to help you better understand the latest rules on allowable deductions for charitable donations of cash and property as well as potential carryover opportunities. As always, we encourage you to reach out with any questions or concerns regarding your accounting and tax needs by calling 904-330-0268 or emailing dbrock@brockcpa.com.
