17 Oct 2022 NEW: 2022 Tax Deductions for Charitable Donations
As CPAs, we stay up to date on all areas of tax law so we can uncover maximum savings for our clients. This, of course, includes laws related to charitable giving. Tax law changes in 2022 and 2021 allow some added tax benefits for those donating to charity. Here are a few of the expanded benefits that may apply to your charitable contributions this year.
- Non-itemizers get an expanded benefit. The 2017 Tax Act increased the Standard Deduction such that nearly 90% of taxpayers no longer itemize. For 2020 a $300 deduction was allowed as an adjustment to income on all tax returns for cash donations – non-cash donations do not qualify. For 2021 married couples were able to claim $600 for cash donations – $300 still applies for those single taxpayers. Cash donations are defined as debit or credit card, check, cash, or unreimbursed out-of-pocket expenses to a qualifying charitable organization.
Donation Limited by Adjusted Gross Income
- Higher donation limits for those who itemize. Donations to qualifying charitable organizations are usually limited to 20% to 60% of Adjusted Gross Income (AGI), depending on the type of charitable organization. For 2021 these charitable contribution limits were increased to 100% of AGI. One needs to make an election on the tax return for the higher limits.
Donation Limited by Taxable Income
- C Corporation limits are increased. The normal limit for C Corps is 10% of taxable income, but for 2021 this increased to 25% of taxable income. As with the individual limits, an election(s) must be made on the 2021 tax return. If the charity accepts them, it is also possible to deduct the total fair market value of a charitable contribution of C Corp or S Corp stocks.
- Higher limits for businesses for food donations. Specified food inventory donations by businesses may qualify for increased limits, from 15% to 25%. The 25% of taxable income for C Corps, as noted in #3 above applies. For other business entities, S Corps, Partnerships, and Sole Proprietors, the limit is computed on the personal return where the income passes through for tax assessment purposes. There is also a special method for computing the enhanced deduction, and there are also other requirements, including food quality standards.
For Accurate Tax Deduction, Trust the CPAs at Haynie & Company
The points mentioned above are one-time enhancements to charitable donations that are effective only for 2021 unless extended by Congress. As with any donations to charity, you should get a receipt from the charity for your charitable contribution. Keep this with your tax documents in case you need to prove and itemize deductions.
Have more questions about your taxable income or charitable tax deductions? Reach out to the pros at Haynie & Company for expert guidance today, and enjoy your biggest tax savings!
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