Charitable Contributions
A charitable contribution is a voluntary donation or gift to a qualified organization. It is made without getting, or expecting to get, anything of equal value.
The new tax law increases the amount of cash contributions you can deduct as an itemized deduction from 50 percent of your adjusted gross income (AGI) to 60 percent for tax years 2018 through 2025. Your AGI is your gross income less certain adjustments to your income and can be found on your tax return.
The new tax law keeps the deduction limit for contributions of appreciated property at 30 percent of your AGI. It also keeps the five-year carry-forward period for charitable deductions.
Note: Appreciated property is real, personal, or intangible property assets that have greater value than what you originally paid for them. Intangible property can’t be touched, but they have value. Some examples include patents and copyrights.
Previously, you were only allowed to deduct cash contributions to qualifying organizations up to 50 percent of your AGI. This 50 percent limit on cash contributions was limited to 30 percent for certain private foundations.
The deduction limit for contributions of appreciated property was limited to 30 percent of AGI. In addition, you could carry-forward any amounts that exceeded the AGI thresholds for five-years (on future tax returns).
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For tax years 2018 through 2025, you can deduct an itemized deduction for cash contributions to qualifying organizations up to 60 percent of your AGI. |
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For contributions of appreciated property, your deduction is limited to 30 percent of AGI. You can carry-forward for five years (on future tax returns) any amounts that exceed the AGI thresholds. |
How will this affect me?
Daniel owns a business. In 2018, he donated the $55,000 he inherited from his grandmother to his church. Daniel plans to file a file a tax return using single filing status and he expects his AGI in 2018 to be approximately $100,000. Daniel should be able to deduct the entire cash contribution as an itemized deduction because it is less than 60 percent of his expected AGI.
Same as above, but Daniel’s expected 2018 AGI is $80,000. Daniel will only be allowed to deduct as a charitable contribution $48,000 (60 percent of his AGI).