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.