- June 15, 2023
Lost & Found: There May be Money Out There with Your Name on It
Personal Finance| Tax Planning
read moreIf you’re like me, December is the month to sit down and send out cards to loved ones and mail checks to your favorite charities. As always, keep those receipts! This year individuals can deduct, above the line, up to $300 for cash donations. This amount doubles to $600 for married couples filing a joint return.
You might be thinking this doesn’t apply to you, because like most American taxpayers, you claim the Standard Deduction and no longer itemize expenses such as donations to your favorite causes. This is not the case. Resulting from a temporary provision that was part of the Pandemic Relief package approved by Congress, taxpayers can benefit even if they take the Standard Deduction. As the rule currently stands, this charitable deduction goes away on January 1st (2022).
Assuming you take full advantage and donate the maximum ($300 or $600), how much you save in tax will depend on your taxable income and your tax bracket. The range can be between $30 and $222.
A married couple with an effective tax rate of 25% could lower their federal tax liability by $150 if donating the full $600.
Requirements to remember:
For those who are itemizing, another change worth noting: In past years, individuals could only deduct cash contributions (donations) up to a limit of 60% of their Adjusted Gross Income (AGI). This limit was eliminated for 2020 and 2021 and taxpayers can deduct cash donations up to 100% of their AGI*.
Although there’s more headroom to potentially deduct your cash donations, it may make more sense to contribute shares of stock/ETFs/mutual funds that have been held at least a year and have appreciated in value. Please check with your PrairieView Advisor for direction on how to best arrange for charitable gifts.
December 31st is the deadline for making your 2021 charitable donations. Most charities will record your gift for the current tax year as long as your mailed check is postmarked in 2021.
While the amount of tax savings that comes with this special charitable deduction is modest for most taxpayers, it is a way to get more dollars flowing to charities who are helping those in need.
From all of us at PrairieView, best wishes for the Holidays and a very healthy New Year!
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Personal Finance| Tax Planning
Personal Finance| Tax Planning
Personal Finance| Tax Planning
Personal Finance| Tax Planning
Personal Finance| Tax Planning
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