Everyone is always looking for ways to save on their taxes. It’s a big hurdle every year to get through, but luckily there are many ways to help keep your taxes down. Donating to charity every year is one such way.
Donations to charities can reduce your taxable income. But how much donation is tax-deductible? Is there a limit to how much you can deduct? Many people aren’t sure exactly how charitable deductions work.
If you want to employ this strategy for your taxes this upcoming year, it’s important that you understand the ins and outs. Read on and we’ll walk you through what you need to know.
What Is A Charitable Deduction?
If you’ve donated a lot to charity in the last year, you can take the amount given out of your taxable income. It’s worth noting this is only worthwhile if the amount you gave is greater than the standard deduction for your personal income bracket.
In order to claim a charitable deduction, you would need to itemize your tax deductions and turn down the standard deduction.
You would then make a claim on your Schedule A. This is where you would list all of your charitable deductions. So if you plan to give to an organization, donate junk car, or something else, this is where it would be listed. The Schedule A also lists all other deductions outside of charitable ones, including medical costs and insurance premiums.
There are some rules in play from the IRS that decree what is and is not considered a charitable donation. For something to be tax-deductible, it must be a donation of cash or property, and there must be proper and thorough record-keeping.
The donation in question must also be to a qualified tax-exempt organization, not just anyone you give money to off the street.
How Much Donation Is Tax-Deductible?
If you’re feeling very charitable this year, you might wonder about just how much of your taxable income you can deduct.
Generally speaking, contributions you make up to 30% to 60% of your adjusted gross income can be counted. That’s a large window of percentage, and that’s because the exact number depends on which charities you are giving to.
What about cash donations specifically? In 2018, the Tax Cuts and Jobs Act increased the limit for cash donations from 50% to 60%, where it currently stands. This will last at the very least to the end of the year 2025, which is when the bill will be up for renewal.
Luckily, if you are over the threshold, that does not mean the excess money you gave has no tax worth. The excess can actually be carried over to later tax years. These kinds of excess contributions can be carried over for up to five years without expiring, which means they’ll likely help you out at one point or another.
The IRS & Charitable Donations
When it comes to doing your taxes, charitable donations can do nothing but help. But how much donation is tax-deductible? You can find all the info you need above.
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