Amid the hustle and bustle of the holiday season, are you considering donating to a non-profit organization?
The holiday season, starting from the end of November to the end of December, is the time when people are most generous with their charitable giving. It is estimated that 25% or more of giving takes place from Thanksgiving to the end of December.
It feels good to practice unselfish concern for others by giving to a non-profit who can make a greater impact that we can individually. It also feels good to get a sweet tax benefit from it. (You knew I was going there!)
So if the feel-good endorphins aren’t enough to compel you to give, perhaps knowing that you can lower your overall tax bill will be the extra encouragement needed.
Itemizing – Generally, you can claim a charitable donation as a deduction on your taxes only if you itemize your deductions. That means you’ll have to exceed the following standard deduction amounts for 2022 to qualify for itemizing:
- $12,950 for single and married filing separate taxpayers
- $19,400 for head of household taxpayers
- $25,900 for married filing jointly or qualifying widow(er) taxpayers
Only donations to qualified charities, such as nonprofit, religious, charity or educational groups, are eligible for itemized deductions (donations to a GoFundMe campaign aren’t tax deductible). Verify that the organization is tax-exempt by searching the IRS Tax Exempt Organization Search Tool.
Generally, you can deduct up to 60% of your adjusted gross income as charitable contributions each year. Be sure to keep a record confirming your donations as part of your tax records such as:
- Receipts from the organization
- Credit or debit card statements
- Bank statements
- Canceled checks
Bunching – If you want to make the most of your giving and usually make charitable donations over $10,000, consider the bunching strategy. This allows you to “stack” your gift-giving in a tax year.
For example, if you’re single and you would like to give $10,000 annually to your favorite charity but you don’t have any other itemized deductions. In this situation, giving a gift of $10,000 wouldn’t qualify you to claim the full donation as an itemized deduction (because the 2022 standard deduction for single filers is $12,950).
Here’s where the bunching strategy comes in to play: Give $10,000 now for 2022 and give another $10,000 on Dec. 31 for 2023. This strategy allows you to claim the $20,000 gift as an itemized deduction on your tax return for the year in question instead of taking the standard deduction. The $20,000 deduction can reduce your taxes.
Just remember that with any contribution, donations must be postmarked by December 31, 2022, to count for 2022.
Cash – You may be thinking, “but what about all those cash donations to charity for bell ringers, gift wrappers and such during the holidays? Can’t I claim that?” The best thing to do in this case is to ask them for a receipt. However, if you donate over $250 to that organization, a specific receipt is required that states what benefit you received if any.
No matter what your reason for giving…motivational speaker Brian Tracy says, “Always give without remembering and always receive without forgetting.” As a tax strategist, I always say give with a grateful heart, but be sure to get the acknowledgement receipt!
If you would like help with charitable contributions or any other tax deduction, you can schedule a consult with me by contact us at 301-714-2071 or at www.SaundersTax.com. Then you, too, can experience a Less Taxing Life and More Prosperous Solutions.