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A Tax Planning Guide For Non-Profits

Triston Martin

Dec 23, 2023

Giving USA found that daily charitable giving in the United States totalled over $1 billion, making it a potent tool for meeting critical community needs. Giving is highly valued in the United States, so much so that the federal tax law offers several breaks to people who donate their money to charity. Charity donations can help lower three types of federal taxes: income, capital gains, and inheritance taxes, if you use the right tax planning tactics.

Donations: How To Get A Tax Break

If you itemize your deductions on your tax return, the Internal Revenue Service allows you to write off gifts of cash and property to approved charities. Donations to GiveDirectly and other public 501(c)(3) charities are tax deductible.

Use the IRS's Tax Exempt Organization Search tool to verify the tax-exempt status of your chosen charity, and consult the graphic for high-level insight into whether or not your contributions might reduce your tax bill.

How Much Can I Take Off If I Give Money?

To what extent you deduct your charitable contributions is up to you. Donations can be deducted up to 60% of your adjusted gross income. However, this number varies by charity and kind of donation. Depreciated stocks and real estate held for more than a year can be written off at their current market value, up to 30% of your adjusted gross income.

Who Gets Charity Deductions?

Donations that meet the criteria for a tax deduction are available exclusively to those taxpayers who itemize their deductions rather than taking the standard deduction. For the 2021 tax year only, the CARES Act temporarily relaxed these requirements for eligibility. Below you'll find information on the 2022 tax year in the United States, including contribution limits, deadlines, and any changes in the law.

Can I Claim Charity Deductions?

To be eligible for tax deductions for charitable contributions, you or your tax preparer must fill out and submit Form 8283 to the Internal Revenue Service. Donation acknowledgement letters or other supporting documents should be kept for tax purposes.

This might be a bank statement, credit card statement, or cancelled check for monetary gifts. A formal acknowledgement from the charity is necessary if the donor cannot locate any other contribution documentation. Donors must take the initiative to seek and collect written. Thank you from the organization.

Limits, Dates, And Tax Implications of 2022 American donations

Curious as to how charity donations will be taxed in 2022? If you want to give wisely this year, consider the following:

Standard Tax Deductions

Inflation has led to an increase in the standard tax deduction. The standard deduction for a single taxpayer in the United States is $12,950 for the tax return covering the year 2022.

A standard deduction of $25,900 is available to married taxpayers who file jointly. Compared to the regular tax deductions in 2021, these amounts are $400 more for single taxpayers and $800 higher for married filers.

Charitable Deduction Limits

In 2022, you can deduct up to 60% of your adjusted gross income (AGI) for cash gifts and up to 30% of your AGI for donations of non-monetary assets if your itemized deductions are higher than the standard deductions listed above. When you donate to a charity that is more than the standard deduction, you can deduct the excess on your taxes for up to five years.

Deadlines For Charity Donations:

The deadline for donating to charity in 2022 is December. To qualify for a deduction in 2022 taxes, donations must be made before the clock strikes midnight on December 31 in your time zone.

Giving To Charity: Maximizing Your Tax Benefits

Donating in a tax-efficient way is something you should think about, and the following are some systematic approaches:

Instead of Cash, Provide Valued Stocks or Bonds

If you've kept an item for more than a year and then donated the cash earnings to charity, you may be entitled to avoid paying capital gains tax. This may boost your tax deduction and the significance of your contribution.

Group Gifts Into One Tax Year

To avoid choosing between itemizing and claiming the standard deduction, taxpayers on the fence about which option to take may benefit by "frontloading" or "bunching" their philanthropic contributions from previous years into a single tax filing season.

Find Tax-Efficient Ways To Donate

Qualified charitable distributions, donor-advised funds, charitable residual trusts, charitable lead trusts, and family foundations are all vehicles for charitable giving that can provide tax benefits to donors.

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