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Important Considerations for 2022 End-of-Year Charitable Donations

News, Offshore Account Update

Posted in on November 29, 2022

From Giving Tuesday (the first Tuesday after Thanksgiving) through New Year’s Eve, many U.S. taxpayers choose to make charitable donations at the end of the year. Whether they give in the holiday spirit or after evaluating their impending tax liability, taxpayers who choose to make charitable donations can achieve significant tax savings—provided that they select their charities and plan their gifts carefully.

What do U.S. taxpayers need to know about making end-of-year charitable donations in 2022? Here are some key considerations to keep in mind:

1. Only Donations to Eligible Tax-Exempt Organizations are Tax-Deductible

Taxpayers can only deduct charitable donations that they make to eligible tax-exempt organizations. The Internal Revenue Service (IRS) maintains a list of eligible organizations, and taxpayers can search this list using the IRS’s  Tax Exempt Organization Search.

But taxpayers can also rule out certain types of organizations completely. For example, donations to private foundations are not tax-deductible, nor are donations to supporting organizations (non-profits that focus exclusively on providing services to other tax-exempt entities).

2. Donations In Cash and In-Kind Are Both Tax-Deductible

The IRS allows taxpayers to take deductions for charitable donations made both in cash and in kind. For donations of property, the amount of the deduction is generally determined based on the property’s fair market value at the time of the donation. Taxpayers who volunteer their time with eligible tax-exempt organizations can also deduct any unreimbursed expenses they incur in connection with their volunteer service.

3. In-Kind Donations Can Offer Enhanced Tax Benefits

While donations in cash are most common, donations in kind can offer the greatest tax benefits for many taxpayers. For example, taxpayers who donate appreciated assets (i.e., securities or real estate) can often achieve significant tax savings.

By donating appreciated assets, taxpayers can avoid incurring the capital gains tax they would otherwise have to pay. This means that they can donate more—increasing the amount of their charitable deduction. Additionally, since eligible charities enjoy tax-exempt status, both the taxpayer and the charity can attain enhanced benefits from this approach.

4. Individuals Over Age 70 ½ Can Make Charitable Distributions of Up To $100,000 Annually

The IRS also allows taxpayers over age 70 ½ to make charitable distributions from their Individual Retirement Accounts (IRAs). Eligible taxpayers can exclude up to $100,000 annually through their charitable distributions. This applies exclusively to IRAs—not SEP IRAs, SIMPLE IRAs or other retirement accounts.

5. Taxpayers Must Document and Accurately Report Their Charitable Donations

To obtain the tax benefits of charitable giving and avoid unwanted scrutiny from the IRS, taxpayers must document and accurately report their charitable donations. In the event of an IRS audit, being able to substantiate a deduction based on a documented donation to a tax-exempt charity can avoid unnecessary issues while helping to steer the IRS’ inquiry toward a favorable resolution.

Get Help from Tax Attorney Kevin E. Thorn in Virginia

If you have questions about claiming charitable donations on your federal income tax returns, tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, can help. To schedule a confidential initial consultation, please call 703-752-3752, email ket@thornlawgroup.com or request an appointment online today.

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