Donation Limits When Mixing Cash and Non-Cash Donations

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Does 30 plus 30 equal 60? Probably not if you’re looking to make donations of 30% of your AGI in cash and another 30% of your AGI in stocks.

Let’s revisit the charitable contribution rules.

To begin, you can generally take an itemized deduction for donations to a qualified charity. Your deductible donations are limited to a certain percent of your income.

For cash donations, the donation limit was 50% of your Adjusted Gross Income through 2017. It’s 60% of AGI in 2018 through 2025. If Congress doesn’t make changes, it goes back to 50% in 2026.

Example: In 2023, your AGI was $100,000. You can deduct up to $60,000 in donations.

Why the changing numbers? The temporary increase to 60% was part of the Tax Cuts and Jobs Act.

Most non-cash donations have an income limit of 30% of AGI. This number did not change with the Tax Cuts and Jobs Act and isn’t scheduled to change.

Cash means actual cash money including dollar bills and bank transfers. Non-cash means just about everything else including investments like stocks.

What the Increase to 60% Really Means

There are two parts to the charitable donations tax law that are important to this discussion.

One part sets the limits like 60% for most cash donations and 30% for most non-cash donations.

One part says how to calculate your deduction if you have both cash and non-cash donations.

The problem with making both cash and non-cash donations in the same year is that the part of the Tax Cuts and Jobs Act that increased cash donations to 60% did not change the part of the law that says what to do if you have both cash and non-cash donations.

If we look at IRS Publication 526, it says:

If your contributions are subject to more than one of the limits discussed earlier, use the following steps to figure the amount of your contributions that you can deduct.

  1. Cash contributions subject to the limit based on 60% of AGI. Deduct the contributions that don’t exceed 60% of your AGI.
  2. (doesn’t apply to our discussion)
  3. (doesn’t apply to our discussion)
  4. Contributions of capital gain property subject to the limit based on 30% of AGI. Deduct the contributions that don’t exceed the smaller of:
    1. 30% of your AGI, or
    2. 50% of your AGI minus your contributions subject to the limits based on 60% or 50% of AGI (other than qualified conservation contributions).

So let’s apply the example we started with. Donating 30% of AGI in cash and 30% of AGI in stocks.

In step 1, we put 30% for cash.

In step 4, we have to subtract the 30% in cash from 50%. That gives 20% as our remaining limit for deducting stock donations.

So our charitable donation for this year is 30% in cash plus 20% in stocks equals 50%. The extra 10% in stocks can’t be deducted in this year even though the total donations added up to 60%.

Why are we subtracting 30% in cash from 50% instead of the updated 60 limit%? The part of the law that says what to do if you have both cash and non-cash donations didn’t change.

Now some people have been saying, “it’s really supposed to be 60%. Even if the law technically doesn’t say that, that was the intent.”

Examples of this discussion include https://giftlawpro.giftlegacy.com/glawpro_subsection.jsp?WebID=GL1999-0001&CC=1&SS=1&SS2=3 and https://www.hembar.com/assets/The-Disappearing-60-Deduction.pdf.

But that’s going all the way back to 2018 and here we are in 2023 with the IRS keeping the instructions the same.

The safe answer is that 30 plus 30 does not equal 60.

But the IRS instructions aren’t always right. If you’ve found a way to say it really should be the full 60, please drop me a note.

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