Donating to Charity in 2022? Make Sure You Get the Tax Break You Deserve

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KEY POINTS

  • The IRS enables you to deduct certain charitable contributions on your taxes, provided you meet certain criteria.
  • Only donations to certain organizations are tax-deductible.
  • You must have some sort of paper trail documenting your donation for it to count.

It's worth taking the time to do this right.

Giving to organizations that are doing good in the world is rewarding enough, but there's no reason you can't also reap the rewards of your generosity. The federal government gives you a tax break for charitable contributions as long as you follow a few rules. Here's what you need to know in order to claim your tax break for your 2022 charitable donations.

You must donate to a qualifying organization

Donations are only tax-deductible if they're made to organizations the government has ruled tax-exempt. These include houses of worship, veterans' groups, volunteer fire departments, and more.

If you're not sure whether an organization qualifies, you can look them up using the government's Tax-Exempt Organization Search tool. It's a good idea to check this unless you're very confident you're dealing with a legitimate charity. Otherwise, you won't get your tax deduction -- and worse, you could be handing money to a scammer.

You can't deduct more than 60% of your adjusted gross income (AGI)

Individuals are only able to write off up to 60% of their adjusted gross income (AGI). This is your income minus certain tax deductions. There's no rule saying you can't donate more than 60% of your AGI. But if you do, you won't get a tax break for the rest.

Charitable contributions to certain organizations are subject to lower limits. For example, contributions to certain private foundations, veterans organizations, fraternal societies, and cemetery organizations are capped at 30% of your AGI.

This probably won't affect you unless you plan to make a very large donation. When in doubt, you may want to ask the organization you're donating to. It may be able to tell you more about the tax rules that apply.

You need to have proof

The IRS won't often ask for it, but you need to have proof of your charitable donations. If you don't and you get audited, the IRS could disallow the deductions even if they were actually legitimate.

What counts as proof depends on what you're donating and the size of the donation. For cash donations of less than $250, you can use a bank or credit card statement or a copy of a canceled check. If you donate more than $250 in cash, you need a written acknowledgement of the gift from the charity itself.

Donating property is more complicated. The property must be in good condition, and the deduction you claim must be based on the item's current value, not the original purchase price. If you donate more than $250 of items, you need a written acknowledgement from the charity, and if you donate more than $500, you must fill out Form 8283 and submit it with your taxes. Donations of more than $5,000 require an appraisal as well.

It's also worth noting that if you receive anything from the charity in exchange for donating, you can only write off the difference between your donation and the cost of the gift. For example, if you get a T-shirt for donating, your tax deduction would be the difference between your cash donation and the cost of the T-shirt.

You need to itemize your tax deductions

In 2021, for the first time, you were able to write off up to $300 in charitable donations even if you didn't itemize your taxes. But that rule didn't carry over into 2022, so now we're back to only being able to write off donations if you itemize your tax deductions.

This really only makes sense if you believe your itemized deductions will exceed the standard deduction for your tax-filing status. In 2022, the standard deduction for single filers is $12,950 and for married couples filing jointly it's $25,900. If your itemized deductions (which can include a lot more than just charitable donations) don't exceed this, you're better off going with the standard deduction even if you won't get rewarded for your charity.

It might seem like a lot of rules, but it's important to take the time to do things right if you plan to claim a charitable contribution tax deduction. You don't want to give the IRS any excuse to come after you.

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