Maximizing Charitable Contribution Deductions

Maximizing charitable contribution deductions is still a great tax savings tool, but it now requires more planning. Now is a great time to look at this area as part of your tax planning exercise.

Background

Typically, cash and non-cash charitable donations can be deducted on an itemized return. But with the standard deduction now $12,950 for single filers and $25,900 for married joint filers, itemizing this year is less beneficial for most of us.

More-so, many other itemizable deductions have been reduced as well, including miscellaneous itemized deductions, state and local tax deductions, and home loan interest deductions.

Leverage charitable tax planning

If you are hoping for maximizing charitable contribution deductions, you can still make it work. Read below to find out how.

Understand the above-the-line deduction expired

Unless Congress acts, the $300 above the line deduction for charitable contributions ($600 joint filers) expired at the end of 2021. Thus, charitable contribution deductions are only available if you itemize your deductions.

Conduct a year-end tax forecast

Plan now to see how close the amount of all your yearly itemizable items will come to exceeding your standard deduction threshold.

Bundle two-in-one

Consider bundling two years of charitable giving into one year. This will allow you to maximize your itemizations in one year, while using the tax savings of the standard deduction in the other year to help pay for your donations. Still not enough? Consider bundling three years of giving into one!

Maximizing charitable contribution deductions

When you can take advantage of the charitable deduction, consider donating appreciated stock held longer than one year. This is a better alternative than writing a check as you avoid paying capital gains and you can deduct the fair market value of the stock as a donation.

Look into a donor advised fund

When you establish this account, you receive an immediate charitable deduction for your contributions. Next, the contributions are invested, and finally, you can grant the funds to qualified charities over time.

Itemized deduction rules have changed, but there's still hope for maximizing charitable contribution deductions. You simply need to adjust your tax planning. Call if you'd like to discuss this or any other tax-planning strategies.