What percentage can you donate?
Many people consider the holiday season the time to donate to their favorite charities. This year Giving Tuesday falls on November 29th and it’s a day that encourages individuals and businesses to make donations to the non-profits of their choosing.
Some 501c3’s use Giving Tuesday as a chance to launch their end-of-year giving campaigns. Hoping to benefit from the generosity of people wishing to make a a positive impact during the holiday season as well as receive a tax break.
You may be able to take a deduction for charitable donations during a tax year but it depends upon whether they are cash donations vs. non-cash donations.
Additionally, your donations must be made to qualified organizations or 501(c)(3) organizations that have tax-exemption status.
The IRS maintains a searchable database of qualified organizations, although some charitable organizations you prefer to donate to may not be included in this database. So it’s best to confirm their status before making a donation.
What percentage can you write-off?
The IRS sets limits on the percentage of donations that you can write-off in a given tax year. In 2021, that limit was increased to 100% of an individual’s adjusted gross income as part of the CARES Act of 2020 in order to encourage more charitable donations during the COVID-19 pandemic.
However, the rules for charitable donations in 2022 have changed. For cash contributions, you can deduct no more than 50% of your adjusted gross income. For non-cash donations such as stock shares, the limit is 30%. Furthermore, in order for your donations to make a difference in your tax liability, it’s required to itemize your 2022 deductions.
Double check with your accountant before giving
If you are planning on giving be aware of the recent changes to charitable donation deductions in order to get the most tax benefit from your write-offs.
Keep records and receipts or any other documentation of your donations. If you are audited by the IRS and do not have the necessary paperwork to prove your donation you could lose that deduction and pay a penalty.
At GYL CPAs and Advisors, we provide a full range of services, from accounting, tax and auditing services to financial planning and consulting services for individuals, families and businesses.
Whether you’re planning to make donations to your favorite charities or taking a more hands-on approach to giving back during the holiday season, there’s no better way than by giving your money or your time. At GYL CPAs and Advisors, we ae proud of our community involvement in various Rotary Clubs, the California Society of Public Accountants Financial Literacy programs, and other charities.