2022 Year-End Tax Planning: Charitable Deductions

Many times, Individual taxpayers have an unexpected amount of taxable income and wish to find a way to offset that income.  If you are charitably minded, making additional charitable deductions may be a way for you to do that.  However, without careful planning, the additional charitable contributions may not result in a deduction. 

Charitable Deduction 

In order to deduct a contribution, you must make sure that you are able to itemize your deductions.  In the last couple of years, taxpayers could deduct a certain amount without itemizing, but that law expired at the end of 2021.  For 2022 returns, you can itemize if your qualifying deductions, which include medical expenses over 7.5% of adjusted gross income (AGI), up to $10,000 of state and local taxes, mortgage interest expense, and charitable contributions, exceed $12,950 for a single taxpayer, $25,900 for a joint taxpayer, and $19,400 if you file as head of household.  The limit for those 65 and over or blind is slightly higher. 

Itemized Deduction Threshold

If, even with your additional contribution this year, you are close to your itemized deduction threshold but don’t quite make it, you could consider a contribution bunching strategy.  This means you could make contributions in the current year that you would normally make next year.  By doing this, you may be able to get over the limit for this year.  This is particularly gratifying if it is unlikely that you will be over the limit next year. 

Your contribution doesn’t have to be in cash.  You can give long-term appreciated stock as well.  Many taxpayers like this because they can deduct the full value of the stock they’ve held over twelve months and not have to recognize the gain. 

There are a couple of things to keep in mind as you consider this option.  Cash contributions are generally limited to 60% of your AGI, and stock contributions are generally limited to 30% of AGI.  There are other limits that apply depending on the donee organization.   

Contact Us

If you have questions about the tax planning for contributions or want more information, please contact your DWD accountant.