- December 20, 2022
- Posted by General Electric Credit Union
- 6 read
Your Guide to Year-End Charitable Giving
With the arrival of the holiday season and the end of the year approaching, you may be pausing to give thanks for your blessings and the loved ones in your life. This reflection may inspire you to take part in some year-end charitable giving. The tax benefits associated with this could potentially enhance your ability to give and should be considered as part of your year-end tax planning.
Tax deduction for charitable gifts
If you itemize deductions on your federal income tax return, you can generally deduct your gifts to qualified charities. This may also help you give more because you can increase the donation by the amount of any income taxes you would save with the charitable deduction.
However, keep in mind that the amount of your deduction may be limited to certain percentages of your adjusted gross income (AGI). Your deduction for gifts to charity is limited to 50% (currently increased to 60% for cash contributions to public charities), 30%, or 20% of your AGI, depending on the type of property you give and the type of organization to which you contribute. Charitable deductions that exceed the AGI limits may generally be carried over and deducted over the next five years, subject to the income percentage limits in those years.
Make sure to retain proper substantiation of your charitable contributions. In order to claim a charitable deduction for any contribution of cash, a check, or other monetary gift, you must maintain a record of such contributions through a bank record (such as a cancelled check, a bank or credit union statement, or a credit card statement) or a written communication (such as a receipt or letter) from the charity showing the name of the charity, the date of the contribution, and the amount of the contribution.
If you claim a charitable deduction for any contribution of $250 or more, you must substantiate the contribution with a contemporaneous written acknowledgment from the charity. Meaning, you have to obtain the written acknowledgement no later than when you file the return for the year you made the contribution. If you make any noncash contributions, there are additional requirements.
Year-end tax planning
When making charitable gifts at the end of the year, you should consider them as part of your year-end tax planning. Typically, you have a certain amount of control over the timing of income and expenses. You generally want to time your recognition of income so that it will be taxed at the lowest rate possible, and time your deductible expenses so they can be claimed in years when you are in a higher tax bracket.
For example, if you expect to be in a higher tax bracket next year, it may make sense to wait and make the charitable contribution in January so that you can take the deduction next year when the deduction results in a greater tax benefit. Or you might shift the charitable contribution, along with other deductions, into a year when your itemized deductions would be greater than the standard deduction amount. And if the income percentage limits above are a concern in one year, you might consider ways to shift income into that year or shift deductions out of that year, so that a larger charitable deduction is available for that year. A tax professional can help you evaluate your individual tax situation.
- Did you know? You could save you up to $15 when you file through TurboTax® Online™. Find out how.
A word of caution
Only donate to recognized charities and be wary of charities with similar-sounding names. It is common for scam artists to impersonate charities using bogus websites, emails, phone calls, social media, and in-person solicitations. Verify the legitimacy of a charity on the IRS website, irs.gov, using the Tax Exempt Organization Search tool. And don't send cash! Contribute by check or credit card.
Looking for opportunities to give back to your community? Consider making a year-end donation to one of General Electric Credit Union’s 2022 Giveback Partners. From animal rescue to mental health awareness, our partners are making a big impact on a local level. Learn more about them here. Then, follow us on Facebook for volunteer pictures and updates from our Giveback Crew.