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Charitable Giving Under the New Tax Law

‘Tis the season for giving. In 2018, Americans gave an estimated $427.71 billion to U.S. charities. By donating to charity, you’re reducing your tax burden and helping the charity you’re giving to. However, under the changes to the tax law in 2019, you would need to make sure that your charitable donation is eligible for deduction. Here are a few things you need to know.

Not everything is tax deductible

Charitable giving only counts as tax deductible if it is given to a 501(c)(3) nonprofit organization, according to the IRS. Some nonprofits do not have that designation, so make sure that you do your research before donating if you are trying to reduce your taxes. The IRS has a useful tool that you can check to make sure that the organization you’re choosing qualifies as tax-exempt. 

How much you are able to deduct

In general, the IRS will allow deductions of up to 50 percent of adjusted gross income.  Certain organizations are limited to 30 percent AGI. 

In order to take the deduction, you must itemize your taxes (which means you cannot take the standard deduction) and file a schedule A in addition to your tax return. Without these, your charitable contribution will not count toward reducing your tax burden.

Cash and noncash donations

If you are donating cash or noncash items, you need to submit a written record:

  • For cash items: You will need documentation (either a bank record or written communication from the qualified organization) containing charity name, donation amount, and the date of the contribution.
    • For any contribution of $250 or more, in addition to the documentation above, you must disclose whether the organization provided any goods or services in exchange for the gift. If they did, you are responsible for providing a description and a good faith estimate of the value of those goods or services. 
  • For noncash items: If any noncash items are $500 or more, you must fill out Form 8283.

Expenses related to volunteering

If you have expenses related to volunteer work, such as driving a vehicle in service of a charitable organization, you can document those as well. Make sure you keep your receipts.

Charitable giving under the new tax law

If you have any questions about charitable donations for the 2019 tax year, contact your financial advisor at Chatterton and Associates


The Team at Chatterton & Associates

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