Charitable Tax Deduction: How Giving Can Save You Money During The Holidays

Thanksgiving is coming up fast, and you know what this means, right? That’s right — it’s time to give and claim your charitable tax deduction!

In this article, we’ll cover:

  • What are charitable donations
  • Charitable tax deduction definition
  • How charitable donations can reduce tax liability
  • What counts as a charitable donation

Though it’s important to note that you can give as much of your money to anyone you want, there are tax perks to giving to specific organizations. Let’s dive in!

What Is A Charitable Donation? What’s A Charitable Tax Deduction?

In terms of taxes, a charitable donation is a gift to a nonprofit organization to help accomplish its goals. This gift is often cash or property. The giver must not receive anything in return. 

A charitable tax deduction is a deduction the government offers on your tax return to help encourage taxpayers to support nonprofit organizations.

So, to summarize, a charitable donation is the actual act of giving, and a charitable tax deduction is a tax benefit to reduce taxes.

What Is The Charitable Donation Limit For 2022?

For 2022, the charitable donation limit is generally 60% of AGI (adjusted gross income) for cash and 30% AGI for non-cash assets (must have been held for at least a year). 

For example, let’s say you make $50,000 a year before taxes. This is otherwise known as your gross income. If you want to donate money to a qualified charity, the maximum amount you can donate is $30,000. To donate a non-cash asset, such as a building, the maximum value you can donate is $15,000. (You must have held this asset for at least a year.)

You can also donate over this amount and carry the surplus over for up to 5 continuous years. 

Please note that there can be additional limitations for each charity. For instance, private charities limit deductions of 30% AGI.

Do I Have To Itemize My Deduction? Can I Claim The Charitable Tax Deduction On My Standard Deduction?

To claim the charitable tax deduction, you will likely choose to itemize your deduction instead of taking the standard deduction. 

For 2023, the standard deduction is $12,950 (for single and filing separately) and $25,900 for married filing jointly. 

However, it’s possible to claim the charitable tax deduction if you take the standard deduction. You can write off $300 if single, head of household, or filing separately and $600 if married filing jointly.

How Can Charitable Donations Reduce Taxes?

Since you must only pay the least amount of taxes legally owed, it makes sense that many take advantage of charitable tax deductions. 

The main way charitable donations help reduce your taxes is to reduce the amount of taxable income. This can be done in many ways, but the one many taxpayers use is to write off capital gains tax. 

What Qualifies As A Charitable Donation?

A charitable donation is a gift to a qualified organization registered as 501(c)(3). Some organizations can be given to and deducted from your taxes, but these are less common than qualified charities.

TaxRise recommends asking the organization about their qualification before giving any money or assets. 

You can search for qualified organizations near you or see if any national organizations that align with your values are qualified. 

Do I Need A Receipt?

If your contribution was less than $250, you don’t need a receipt to claim a charitable deduction. 

If you contribute more than $250 in cash or assets, you must provide a receipt on your tax return.

The Takeaway

If you owe back taxes, check out TaxRise’s free tax consultation. From this 30-minute call, you’ll be able to determine if you qualify for our services and which tax relief program will work best for your unique situation. 

We represent taxpayers who are audited by the IRS. We help advocate for the best relief outcome possible.

TaxRise has helped thousands of taxpayers just like you resolve their tax issues and erase their tax liability. Book your call and get started today!

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