The rules for charitable donations were expanded in 2021 as part of COVID-19 recovery. In 2022 and beyond, the rules will be back to normal. Here’s what to expect.
What were the special charitable contribution rules for 2021?
The main change for 2021 was allowing all taxpayers to deduct up to $300 in charitable contributions ($600 for joint filers) without itemizing their deductions.
Normally, people who use the standard deduction can’t take any charitable contribution deductions.
At present, there will not be a $300 charitable deduction in 2022.
What are the charitable contribution limits for 2022 and 2023?
The charitable contribution limits depend on what kind of contribution you’re making. The limit is a percentage of your Adjusted Gross Income.
- Cash contributions* to a public charity in 2022, 2023, 2024, and 2025: 60% of your Adjusted Gross Income each year
- Cash contributions to a public charity after 2025: 50% of your AGI
- Contributions of short-term capital gain property to a public charity: Same as above
- Cash and short-term gain contributions to a private foundation: 30% of your AGI
- Contributions of long-term capital gain property to a public charity: 30% of your AGI
- Contributions of long-term capital gain property to a private foundation: 20% of your AGI
*Cash means money not things. Cash includes both paper money and other forms of payment like checks, credit cards, and bank transfers.
Charitable donation deductions are an itemized deduction. If you don’t claim itemized deductions, you can’t claim a charitable tax deduction. Your charitable donation will be covered by the standard deduction.
What can you do if you donated more than the AGI limit?
If you donated more than the current year’s AGI limit, you can carry the extra forward to a future year.
For example, in 2022, you donate $10,000 more than the limit. In 2023, you don’t make any donations. You can deduct the extra $10,000 from 2022 in 2023.
One important thing to note is that the extra amount expires after five years, and you have to count current-year donations first. For example, if you had $10,000 in extra donations in 2022, you can use it in 2023, 2024, 2025, 2026, or 2027. But if you also donated up to the limit in each of those years, your $10,000 from 2022 expires and can’t be used in 2028 or beyond.
Also, you have to use any carryover amount in the next year you have space available. So if you have a carryover from 2022 and don’t make other deductions in 2023, you have to use your carryover in 2023. You can’t save it for 2024.
What donations qualify for the charitable contribution deduction?
Tax law requires that deductions be allowed only for contributions that benefit a charitable purpose. For example, you can’t deduct buying a Rolex even though Rolex is owned by a non-profit.
An organization must qualify for tax-exempt status before being granted tax benefits. The list of eligible entities includes organizations operated exclusively for religious purposes, charities, scientific, literary, and educational purposes, and the prevention of cruelty to children.
Some places, like GoFundMe, may let you make both qualified and non-qualified donations. So if you want a deduction, make sure you know which your donation is going to.
Nonprofit veterans’ groups, fraternal lodges, cemetery and burial companies, and certain legal corporations may qualify for tax exemptions, but only if donations go towards eligible purposes. An example of this category is the Knights of Columbus.
The IRS Tax Exempt Organization Search Tool can help verify an organization’s tax-exempt status and determines its eligibility for deductible contributions. You may also want to check out How to Find Not Profit Organizations to Donate To.
Donations to a federal, state, or local government may be considered deductible charitable contributions if the gift is earmarked for public purposes such as maintaining a public park. The conditions of the donation usually need to be in writing to show the purpose of the donation.
Gifts to benefit a particular individual, for-profit business, or private interests do not qualify as deductible contributions. If you want to get a deduction for supporting a person or small business in need, find a non-profit organization that can help and donate to that organization.
You always need to keep proof of cash donations. Otherwise, people could just say they gave money to charity when they didn’t.
- For donations under $250, you can either get a receipt or keep a bank statement showing the donation.
- For donations of $250 or more, you need to get a receipt.
If you donated more than $250 and didn’t get a receipt, contact the charity to see if they have a record of your donation and can issue you a receipt. Otherwise, you may lose your tax deduction.
If you didn’t keep or lost your proof, the IRS will usually disallow your deductions. The main exception is if you can show good cause, which usually means something like a fire destroying your files.
Quid Pro Quo Contributions
Quid pro quo donations are donations that involve an exchange of something for money. This means that you get something back for your donation.
You can only deduct the amount over the fair market value of what you received. For example, if you paid $100 for a round of golf that normally costs $50, you can deduct $50.
If you donate items to a charity, you can generally deduct the fair market value of what you donated. In most cases, you can use pricing guides for your items if guides are available for that item. In some cases, you may need to use what the charity sold your item for.
For high-value items, you may need to get a qualified appraisal when or shortly before you make the donation.
It’s a common tax planning move to donate stock or other appreciated securities.
When you donate stock you generally :
- Get a charitable deduction for the fair market value of your shares at the time of your donation
- Avoid having to pay the capital gains taxes you would have paid if you sold the stock
Charity Donations as Gifts
It might surprise you to learn that when someone makes a donation as a gift, such as to an animal charity in someone’s name, the gift giver and not the recipient gets to take the deduction.
As far as the IRS is concerned, the gift giver hasn’t given the recipient anything. The money went from the gift giver directly to the charity.
All the gift recipient got was a certificate acknowledging the gift. That doesn’t create a deduction for the gift receiver.
If you do want the gift receiver to claim the deduction, you can give cash as a gift but you can’t require the recipient to donate the money. If the gift giver requires the recipient to make a donation, the IRS will treat it as the gift giver’s donation.
Can you deduct money you donated to people affected by the war in Ukraine?
The usual charitable deduction rules apply to any money you donate to Ukraine. Congress hasn’t passed any special tax laws for donations to Ukraine.
If you donate to a qualifying non-profit organization, you can take a deduction under the usual rules. If you provide direct assistance to an individual or family, you generally can’t take a charitable contribution deduction.
What records should you keep to substantiate your deductions?
You should request a receipt whenever you make any type of charitable contribution. If the IRS audits your contributions, it will usually want to see your receipts.
If you can’t provide proof of your contributions, the IRS may disallow your deductions. That could result in you owing more taxes plus interest and penalties.
What is the charity tax form?
The IRS charity tax form for non-cash contributions is Form 8283.
There is no special charity tax form for cash contributions. Cash contributions go directly on your Schedule A (itemized deductions).
If you don’t itemize deductions, you usually don’t get a charitable giving deduction because it’s one of the things your standard deduction covers.
6 thoughts on “Charitable Contribution Rules for 2022 and 2023”
If you purchase tickets to a baseball game (a skybox) for a fundraising event and give the tickets to the person raising money, can you deduct the amount of the tickets as well as the amount that others pay for the tickets to attend the event?
For example, Person A pays $600 for 30 tickets. The receipient, Person B, offers the tickets to others for a $50.00 donation to the charity event they are raising funds for. Everyone donates directly to the charitable organization. Person A or Person B never handle cash. Does Person A who purchased the original tickets get to take the tax deduction for the $900 raised over and above the intital $600 purchase?
To add context, I’m of the understanding that the people who paid $50 for a $20 ticket can take a $30 deduction, they have the receipt from the organization. Can the person who donated the tickets take a $600 donation? I’m not sure they are entitled to the deduction that others will receive – sounds like double dipping. The person who the fundraiser is for gets 0 benefit from a tax deduction standpoint and doesn’t expect to receive one. Person A is under the impression they should receive a deduction for the full amount raised, not just what he paid.
Is there a timeline for charities to issue tax receipts
Charities don’t have an official deadline to issue receipts. You’ll usually want to ask for a receipt at the time you make the donation unless they have a specific timeline in writing.
Some charities do an end-of-the-year written acknowledgment or receipt. This is usually for charities where you make multiple donations during the year. Most of them try to send it by January 31st since that’s when most of your other tax forms are due.
They do want you to get your receipts because if you don’t, you’ll probably stop donating. So if you didn’t get a receipt, contact that charity.
Very informative, Answered my questions.
Excellent article. very helpful thank you