It’s once again time to file your individual tax return. And it’s also time to take stock of the rule changes and new regulations implemented throughout the year that affect what you can claim at tax time. To help filers keep pace, we’re taking a look at one type of deduction — charitable giving — and outlining changes and general reminders to keep in mind this time of the year.
Changes to Charitable Giving Tax Deductions for 2022
Starting with your 2022 return, taxpayers can no longer claim cash donations to charity while taking the standard deduction. This is a change from last year, where those married filing jointly were able to claim $600 in cash contributions and those filing single were able to claim $300 without itemizing. The special rules that allowed above-the-line deductions in 2020 and 2021 have not been extended. You must itemize deductions in order to deduct gifts to charities.
Also, cash donations are limited to 60 percent of your adjusted gross income. This is a change from the last two years, where cash donations were limited to 100 percent of adjusted gross income.
Contributions that exceed the AGI limits in the current year can be carried forward to each of the five succeeding years. Carryover contributions are subject to the original percentage limits in the carryover years, and are deducted after deducting allowable contributions for the current year.
Reminder of Charitable Mileage Rate
The charitable mileage rate is unchanged from last year, remaining at 14 cents per mile.
Beware of recent trends in giving
In order to be deductible, gifts need to be given directly to nonprofit organizations. Recent trends in giving include donations to sites through GoFundMe pages, crowd-funding websites and Venmo/Paypal gifts. When these gifts are made to individuals, they are not deductible contributions for tax purposes. You can use a website like Guidestar.org to confirm the organization you are giving to is eligible to receive tax-deductible contributions.
When giving internationally, be aware that only donations to certain Canadian, Mexican and Israeli charities may be deductible under an income tax treaty with the county. Often, you can support international charitable causes and still receive a tax deduction by donating to U.S. based charitable organizations who operate and support international causes you care about.
Charitable giving through your Individual Retirement Account
Using a Qualified Charitable Distribution (QCD), you’re able to give up to $100,000 directly from a traditional IRA to a charity. A QCD is allowed for individuals who are 70 ½ years old or older and is beneficial when you have to take a required minimum distribution from your IRA but do not need the money. The amount transferred is not deductible as a charitable contribution, but the amount given directly to the charity is excluded from your taxable income. The contribution also counts toward your required minimum distribution for the year.
Itemize with donor advised funds
Donor advised funds are a great way for taxpayers to maximize the tax benefits of their charitable giving. Generally, these funds are operated and maintained by a charity or investment company and are made up of contributions from individual donors. They’re also easy to use and relatively low cost. Donor advised funds give taxpayers the ability to:
- Consolidate giving into one year in order to itemize deductions
- Deduct the entire amount contributed to the fund in one year
- Move money from the fund to the charity in subsequent years when not itemizing
Have more questions about how to claim your charitable giving this year? Contact your RKL advisor or reach out using the form below to start a conversation.
