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Charitable contribution deduction on tax return: the changes compared to 2022

Charitable contributions will no longer be completely deductible from your taxes this year after tweaks to pandemic-era support.

IRS grants extension for certain taxàyers in seven states

The 2023 tax season wraps up on Tuesday 18 April for most US taxpayers. Some Americans in areas hit by natural disasters have been given an automatic extension ranging from 15 May to 16 October this year, otherwise if you need more time you’ll have to apply for an extension. That will give you six months to get your papers in order and submitted but not to pay any taxes owed.

There has been a tax update for Americans who will be looking to offset their charitable donations on their filing.

“Taxpayers who don’t itemize and take the standard deduction, won’t be able to deduct their charitable contributions,” advised the Internal Revenue Service in a letter.

Charitable contribution deduction on tax return: changes compared to 2022

The covid-19 relief legislation allowed taxpayers in 2020 and 2021 to deduct charitable cash donations equivalent to 100 percent of their adjusted gross income (AGI). Those who didn’t itemize their deductions could claim a deduction of up to $600 in cash donations to qualified charities on their tax return filed last year or the year before.

However, those tax laws have now expired and you must take the standard deduction and itemize by filling out a Schedule A form. The standard deduction for the 2022 fiscal year is $12,950 for people who file individually and $25,900 for married couples who file jointly. For the 2023 fiscal year, next year, the amount increases to $13,850 for people who file individually and $27,700 for joint returns that will be filed next year.

Generally, on 2022 tax returns, and beyond, you can deduct up to 60 percent of your AGI via charitable donations. However, depending on the type of contribution and the organization to which it goes the limit may only be 20, 30 or 50 percent.

The limit applies to the whole of donations made throughout the year regardless of the number of organizations to which you gave money. Contributions in excess of the limit can often be carried over to future tax years, deducted from your taxes for five years or until you’ve claimed all of the money you donated. For further instructions you can check out IRS Publication 526 or speak to a tax advisor who can guide you through the process.