Good News for Those who Itemize Their Taxes

If you itemize your tax return each year, you might already know that you can earn a substantial tax deduction in exchange for making charitable contributions. For those who enjoy giving to charity, we have some good news: The IRS has temporarily suspended the contribution limits, allowing you to contribute (and deduct) as much as you want!

During most years, cash contributions of up to 60 percent of your adjusted gross income (AGI) can be used as a deduction on your federal income tax return. Those who donate beyond that limit might enjoy some personal satisfaction, but don’t receive full credit for the contribution on their taxes. Now, with that limitation lifted, you could theoretically donate 100 percent of your AGI and count the entire amount as a tax deduction. 

In fact, it is even possible (though probably not too common) to donate more than your AGI, and then carry forward the balance of the deduction to next year!

This suspension on the normal limit only applies to cash contributions, and not donated items or other types of charity. The usual rules regarding charitable contributions still apply: You must donate to an IRS-qualified charity, you should keep a receipt or other proof of your donation, and the donation must be made by the end of the year in order to qualify on this year’s tax return. 

Before writing any checks, do consult with a qualified tax professional who can guide you through the rules. 

Hopefully, the suspension of this limit by the IRS will inspire more of us to make a difference in a year when so many are in need. If you have any questions about how charitable contributions can fit into your overall financial plan, do give us a call and we can help you adjust your budget.