What to Know about the Gift Tax Deduction and Charitable Donations Tax Deductible and Under the Jobs Act and Tax Cuts
Here are some important things to know about taking a deduction for charitable gifts. Giving to charity can be one of the most rewarding ways of giving, and with the rise in the standard deduction, more people will be able to take advantage of this new law change.
The itemized deduction is being limited by the Tax Cuts and Jobs Act and you may want to consider doing the same. However, it may be more beneficial for some people to establish that a standard deduction will be taken instead. But remember, this new policy is only on the books until 2025, so you’ll likely want to check back in with an accountant in a couple of years.
The Tax Cuts and Jobs Act was a big change for tax deductions, but there is a good side: charitable donations are tax deductible up to 60% of AGI. The new law provides lots of incentives to give to charity, and it’s likely that you’ll choose to take advantage of the increased deduction. Here are some things you should know when donating gifts to charity.
To Maximize Tax Return from Charitable Donations can be itemized Tax Deductions.
According to the Tax Cuts and Jobs Act, the standard deduction increases from $6,350 ($12,700 married filing jointly) to $12,000 ($24,000 married filing jointly). So, for many taxpayers – maybe you – it will make more sense to take the standard deduction than itemize with all of these changes. But don’t worry about it! If you input all your itemized deductions into e-file, TaxSlayer will automatically choose the best choice for you.
Not every donation counts towards your deduction to Maximize your Tax Return
A lot of people don’t realize this, but not all donations will count towards your donations tax deductible.
There are very specific guidelines to consider when it comes to deductions, and not every donation counts. Here are some guidelines:
-If you donate anything other than cash, you need to determine the Fair Market Value of those items.
– You cannot deduct for food items collected in a drive or given to a food pantry.
– If you donate items such as clothing or certain household supplies to an charitable organizations, you may take a deduction for the value of those things if they are in good, used condition, or better.
– If you participate in a charity run, don’t rush to deduct the cost of the race, travel, and accommodations. Your participation probably won’t count as a charitable donation unless it provides other tangible benefits to the charity.
Plan ahead for Charitable Donations to Maximize your Tax Return.
If you usually use the standard deduction, you can donate to charity and get a tax break. But if you make a significant donation this year, consider saving up that amount throughout the year. Then plan on donating it during a year when you also file a tax return. Overall with hopes to get full advantage of the 60% threshold deduction.
You may not be able to deduct your donations if you don’t itemize them. When taking the standard tax deduction, you can still totally donate to charity — even if it means you won’t get the tax break. But if you usually make a cash donation to your favorite organization, consider saving up your contribution amount over time. Then plan to make a large donation when you also itemize your deductions for a year. This could allow you to take advantage of the 60% threshold.
What if I don’t itemize my deductions? You don’t have to! You still have options! If you usually take the standard deduction and don’t itemize deductions in any given year, that doesn’t mean you can’t donate to charity. Keep in mind that donating means giving something from your own funds.
You need proof of the gift to claim it as an itemized tax deductible on your taxes. Therefore, it’s important to document your charitable giving for your records. If it’s worth $250 or more, you’ll have to ask for a document from the charitable organization stating what the gift was worth. This isn’t always necessary, but it is required when the gift is worth either $250 or more and, if it’s not worth $250, there are all sorts of other conditions which apply, so consult a tax accountant before moving forward with this.
Making a qualifying Charitable Donations for Tax Deductible is easy.
The IRS has a handy-dandy tool that determines what your donations are worth, so all you need to do is enter in the total amount of your gift, and it will tell you the value. For example, if your gift was worth $250 or more, you’ll need to find paperwork from the organization stating the gift’s fair market value and whether or not you received any goods or services in return.
It used to be that you could only deduct up to 50% of your Adjusted Gross Income (AGI) for charitable donations. This year, the limit has increased to 60%. This change is a great incentive to donate to charity and you might want to take advantage of this increased limit.
Tax reform eliminated several tax deductible, but the standard deduction was almost doubled. What this translates to many of taxpayers is that it’s better for them to take the standard deduction instead of itemizing until 2025. If you’re not certain on which method will maximize your tax, don’t worry. You’ll input your itemized deductions when you e-file your taxes, and PriorTax will automatically choose the process that will give you the biggest refund.