Charitable contribution deduction on tax return: the changes compared to 2023
There are two changes to charitable donations for this year’s tax season that are worth being aware of if you are aiming to ease your tax responsibility.
For this tax year, there are notable changes regarding charitable deductions, particularly concerning certain conservation contributions made by pass-through entities. If you are a member of a pass-through entity, such as a partner in a partnership or a shareholder in an S corporation, and the entity’s qualified conservation contribution exceeds 2.5 times the sum of each member’s relevant basis, the deduction for such contribution is disallowed.
Additionally individuals have the option to make a one-time distribution of up to $50,000 from their individual retirement account (IRA) to charities through specific charitable vehicles, such as charitable remainder annuity trusts, charitable remainder unitrusts, or charitable gift annuities. These distributions, known as qualified charitable distributions, offer taxpayers an avenue to support charitable causes while potentially reducing their taxable income. Further details on these changes can be found in Pub. 590-B.
Continuing changes set last year
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.
On 2023 tax returns 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.