If you plan to donate to a charity before year-end, you may be wondering how your donation affects your charitable contribution deduction. Here’s the scoop!
Don’t be fooled by scammers — especially in the wake of all of the charitable opportunities following the events that occurred this year. It’s important to make sure you are giving to a qualified 501(c)(3) nonprofit organization. Qualified organizations include nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose or that work to prevent cruelty to children or animals. You can check to see whether the organization you plan to give to is qualified by going to IRS.gov/TEOS.
While tax reform made changes to other itemized deductions, the deduction for charitable donations remains intact with few changes. Typically you can claim your donations of money and goods if you itemize your tax deductions. Those who take the standard deduction usually are not able to take a tax deduction for their donations. This will be something for taxpayers to keep in mind since close to 90% of taxpayers now claim the standard deduction instead of itemizing and are no longer able to deduct charitable contributions under tax reform.
The few changes that were made to the charitable deduction provision as a result of tax reform also include:
- The percentage limit of cash contributions to public charities increased from 50% to 60% of your adjusted gross income (AGI)
- While you were able to claim 80% of the donation for personal seat rights like season tickets for college sports events as a tax deduction before tax reform, you can no longer claim any of the donations as a tax deduction.
Standard and Itemized Deductions
While not a direct change to the charitable deduction provision, another change that could impact whether or not you can still claim all of your charitable contributions if you did before is how the increased standard deduction impacts whether you now take the standard deduction or itemize your tax deductions. TurboTax estimations and IRS data confirmed that close to 90% of taxpayers will now take the standard tax deduction, up from about 70% prior to tax reform.
For tax year 2023, the standard deduction increased to $13,850 for single filers and $27,700 for married filing jointly. If you file as head of household, your standard deduction is increased to $20,800. As in the past, you will claim either the standard deduction or itemize your tax deductions based on your eligible tax-deductible expenses and which option gives you the best tax outcome.
You may be in that category of people for whom the increased standard deduction is greater than their itemized deductions and now may choose to take the standard deduction. For example, if you have $10,000 in state and local taxes (the new limit for property tax, state and local income taxes, personal property taxes, and similar taxes), $8,000 in mortgage interest, and $2,000 in charitable contributions, that totals to $20,000 of itemized deductions. If you are single, you’ll likely itemize your deductions since $20,000 is greater than your $13,850 standard deduction. But if you are filing as a married couple, you’ll no doubt claim the standard deduction of $27,700 instead of itemizing your deductions unless you end up with about $8,000 more in itemized deductions.
If you are close to the new standard deduction threshold, you can increase your tax deductions and itemize your deductions if you donate by the end of the year. By doing this, you will both be helping someone in need and increasing your tax refund.
Don’t worry about knowing whether to take the standard deduction or itemize — TurboTax asks simple questions about you and will give you the option that gives the biggest tax refund that you are eligible for based on your entries.
If you have questions, you can connect live via a one-way video to a TurboTax Live tax expert with an average 12 years of experience to get your tax questions answered. TurboTax Live tax experts are available in Spanish and English, year round and can even review, sign, and file your tax return.
Life Changing Events Explained (IRS Qualifying Life Events)