The IRS Suspends Limits on Charitable Contribution Deductions

Financial Tips

The IRS Suspends Limits on Charitable Contribution Deductions

Posted by Asset Protection Group
9 months ago | December 7, 2020

Many of us enjoy the good feelings we experience when contributing to charities, and the tax deduction doesn’t hurt, either. Each year, those who itemize their taxes can earn a valuable deduction simply from making contributions to their favorite organizations. 

We have some good news for those of you who enjoy this type of tax break: In 2020, the normal limit on cash donations has been suspended, and you can potentially earn an even larger tax deduction for your good deeds. 

In most years, cash contributions to charitable organizations can only be counted at up to 60 percent of adjusted gross income (AGI). If you donate beyond that limit, the extra cannot be counted as a tax deduction. But in response to an increased need for charitable assistance this year, the IRS has suspended that limit. Theoretically, you can donate 100 percent of your AGI and receive a tax deduction for the entire amount. 

Even more surprisingly, you could actually donate more than 100 percent of your AGI and carry the extra tax deduction forward into next year! 

As you might expect, these charitable contributions are still subject to certain rules. The new limit applies to cash donations only – not donated property. And as usual, you can only count donations made to qualified organizations. The donations must be made before the end of the calendar year in order to count on this year’s taxes. 

Hopefully, this suspension on charitable contribution limits will help both those who need assistance and those who could use a tax break. But as with any other complicated financial maneuver, be sure to consult with a tax professional before writing any checks. Then, keep copies of receipts (or credit card statements) so that you can provide proof of your contributions if needed. 

Give us a call if you have any questions about how charitable contributions can fit into your overall financial plan, or if you need help with any other related topics. 

 

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