With the holiday season upon us, it is time to look back at our year and to look forward to achieving our goals for 2018. For many, that means reaching into our pockets and giving back to our communities through charitable contributions. The holiday spirit is a spirit of giving. How can we think strategically about the amount we give at year-end to ensure that we also enjoy the tax benefits from charitable giving?
Prior to 2018, charitable contributions of up to 50% of an individual’s AGI (adjusted gross income) could be deducted if the taxpayer is eligible for itemized deductions. Now, according to the Tax Cuts and Jobs Act, the charitable deduction limit is 60% of a donor’s AGI for cash contributions to public charities (as well as to private operating foundations and certain governmental units).
The new 60% contribution limit applies to cash contributions made in taxable years 2018 through 2025. If the holiday season inspires you to give more to the organizations you care about, remember that now, you can deduct contributions up to another 10% of your AGI. If by chance you exceed the 60% limitation, the excess can be carried over to each of the five succeeding tax years.
Remember that the substantiation requirement for donations in excess of $250 is still in place. Be sure that you receive a contemporaneous written acknowledgement from the charitable organizations you support.