Good New for Those who Contribute to Charity

If you enjoy contributing to charitable causes, and appreciate the tax deduction you earn each year, then we have good news for you: This year, the IRS has suspended the limit for charitable contributions.

Normally, your charitable contributions only count up to a certain limit – 60 percent of your adjusted gross income. You can donate more if you wish, but your tax deduction is capped.

This year, in response to the pandemic situation and an increasing need for charitable assistance, the IRS will allow unlimited tax deductions for this purpose. You can donate up to 100 percent of your adjusted gross income and claim a tax deduction for the entire donation. You can even donate more than 100 percent of your AGI and carry the additional deduction forward to next year. These deductions are still subject to certain rules, of course.

Only certain contributions qualify under the new, temporary rules. The suspension of the charitable contributions limit only applies to cash donations – not donated items. As usual, the donations must be made during the calendar year, and only to qualified organizations. Check the IRS website to be certain of an organization’s status before writing any checks.

The suspension of the normal tax deduction limit can both encourage more charitable contributions and help out taxpayers who would prefer to reduce their income tax liability. As always, consult with a qualified tax professional before making any big decisions, and keep copies of all receipts so that you can prove donations in the event that your tax return is ever audited.

If you have any other questions about financial planning, give us a call. We can help you determine how charitable contributions factor into your overall, long term financial plan.