The Giving Season- How to Give, and How to Keep my Tax Bill Down

With the giving and holiday season just around the corner, we wanted to offer some tax-saving benefits as you share your generosity. I don’t usually itemize; can I still deduct...

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With the giving and holiday season just around the corner, we wanted to offer some tax-saving benefits as you share your generosity.

I don’t usually itemize; can I still deduct any of my contributions?

YES! Beginning in 2020 from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the IRS allowed a $300 tax deduction for qualified contributions from taxpayers that filed with a standard deduction. In prior years, individuals could only deduct contributions if they had an itemized deduction (shown on the Sch A).

In 2021, this deduction for taxpayers with a standard deduction increased to $300 Single, $600 for couples that file jointly. This means you still have time to find and keep records of contributions!

At this time there is no income limitation for the $300/$600 cash contribution, so any taxpayer can deduct this. How do I give a qualified contribution? They must be:

-Cash contributions

-Given to a qualified tax-exempt organization (you can look this up on the IRS Website below)

https://www.irs.gov/charities-non-profits/tax-exempt-organization-search

What if I usually itemize, did anything change?

If you usually have an itemized deduction, there were a few updates. The IRS increased the limit of qualified cash contributions to 100% of income, vs 60% from previous years. There may be certain AGI limits, so keep this in mind as you plan.

Other tips for itemized taxpayers:

-Keep track of your miles! Did you know if you use your personal vehicle for a qualified tax-exempt organization, you may be able to deduct the mileage driven?

-Did you donate a car, property, or other large asset to an organization? Ensure you are receiving the correct paperwork in time for tax season.

Thinking bigger?

Some new proposed tax changes for 2022 might find charitable giving as an important tax planning tool as we close the 2021 tax year. Some of these tax law proposals include removing Roth IRA’s and implementing steeper income requirements, and a limit of funds inside traditional IRA account. Our firm has discussed implementing distributions as a contribution to a charity. This would mean these distributions would be non-taxable, and your IRA would be below the new limits. Give us a call to see if this might benefit you.

Where can I donate?

With so many wonderful organizations, it can sometimes be daunting to find just a few to donate! Keep in mind, any personal time is not deductible (so any time serving food to the homeless is unfortunately not deductible, but any food donated can be a deduction if you itemize). To claim the qualified donation, the organization must be a qualified tax-exempt organization. As a friendly reminder, we always recommend keeping records of what you donated, and what those items were worth at the time of donation (if they were not cash).

Do you have further questions? Was this helpful? Let us know what other tax-saving subjects you want to hear about!

Author: Sarah Goode, LTP
November 16, 2021

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