Tax Breaks for Charitable Giving: Maximize Your Impact and Your Savings
Category: Business
Charitable giving is not only compassionate; it can also be a powerful tax strategy. However, navigating the intricacies of charitable contributions tax rules can be daunting, especially in the wake of the many fast-moving changes to the tax code we’ve seen in recent years.
Understanding the rules and regulations surrounding charitable contributions in 2023 is essential to maximizing your tax advantage, but where to begin?
In this overview, we’ll explore charitable contributions in 2023, including updated information on federal tax brackets, the standard deduction, qualified charitable organizations, and more.
Charitable contributions (donations by individuals, businesses, or organizations to qualified charitable organizations) can take various forms, including monetary donations, donations of assets or property, volunteering time or services, and donating goods or resources.
Donors may make charitable contributions for various reasons, including personal values, social responsibility, and the desire to support specific causes or organizations. In addition to the intrinsic satisfaction of giving back, charitable contributions can also provide potential tax benefits—donors may be eligible to claim deductions on their tax returns, reducing their taxable income and lowering their overall tax liability.
For a donation to qualify, it must be voluntary and should not result in the donor receiving substantial goods or services in return. Additionally, to count as a charitable contribution for tax purposes, you must donate to an organization the IRS recognizes as tax-exempt, generally under section 501(c)(3) of the U.S. Internal Revenue Code.
These organizations are dedicated to charitable, religious, educational, scientific, or literary causes and must meet specific requirements established by the IRS.
To be tax-deductible, contributions must be made and paid in cash or property before the end of your tax year. This rule applies regardless of whether you use the cash or accrual accounting method.
In short, yes—charitable contributions can potentially lower your tax bracket under certain circumstances.
By making eligible donations to qualified charitable organizations, you can deduct the value of your contributions from your taxable income, thereby reducing the income subject to taxation. However, the specific impact on your tax bracket will depend on various factors, including the amount of your contributions, your overall income level, and the applicable tax laws and regulations.
However, don’t forget that your income is subject to state-level taxation, as well (unless, of course, you live in Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, or Wyoming, which do not tax income, or New Hampshire, which does not tax earned wages).
As you review the following information, you should also remember that the IRS taxes income at an overall effective tax rate—meaning your entire income is not taxed at your maximum rate.
To put it another way: If you are a single filer who made $578,125 in total earned income, your first $11,000 will still only be taxed at 10%. The same applies to each income threshold, which is taxed at the corresponding rate, regardless of your total earned income.
2023 Federal Tax Rate | Single | Married Filing Jointly |
10% | $11,000 or less | $22,000 or less |
12% | Over $11,000 | Over $22,000 |
22% | Over $44,725 | Over $89,450 |
24% | Over $95,375 | Over $190,750 |
32% | Over $182,100 | Over $364,200 |
35% | Over $231,250 | Over $462,500 |
37% | Over $578,125 | Over $693,750 |
It’s important to note that there are limits and rules regarding the deductibility of charitable contributions, such as percentage limitations based on your adjusted gross income (AGI) and specific requirements for documentation.
There’s good news and bad news.
The bad news is that the temporary provisions implemented under the COVID-19 relief legislation, which permitted individuals to deduct 100% of their adjusted gross income (AGI) for cash donations in 2020 and 2021, have expired.
The new threshold of deductibility for cash contributions is now 60% of AGI, while non-cash assets fall under a limit of 30% of AGI.
Here’s the good news: The IRS has adjusted the standard deduction to accommodate inflation.
The IRS has raised the standard deduction for married couples filing jointly for the 2023 tax year to $27,700, up $1,800 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction is now $13,850 for 2023, up $900. For heads of households, the standard deduction is $20,800 for 2023, up $1,400 from the amount for the 2022 tax year.
To deduct your charitable contributions in 2023, your total deductions must exceed the standard deduction for your tax filing status.
With that in mind, if you itemize your deductions, you may deduct charitable contributions of money or property made to, or for the use of, any of the following organizations that otherwise are qualified under section 170(c) of the Internal Revenue Code:
If you are still determining whether an organization is eligible for deductible contributions, try entering the organization’s name and location into the IRS Tax Exempt Organization Search tool.
Generally, you can only deduct charitable contributions if you itemize deductions on Schedule A (Form 1040), Itemized Deductions.
In 2020 and 2021, a temporary provision of the Coronavirus Aid, Relief, and Economic Security (CARES) Act allowed taxpayers to claim up to $300 (individuals) or $600 (married filing jointly) in cash donations without needing to itemize. However, this provision has expired and no longer applies as of the 2023 tax year and beyond.
To fully understand how to leverage charitable contributions to optimize your tax savings, consulting with tax professionals (like us!) is a good idea.
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Category: Business
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Jeff Coyle, CPA, Partner of Rosenberg Chesnov, has been with the firm since 2015. He joined the firm after 20 years of business and accounting experience where he learned the value of accurate reporting, using financial information as a basis for good business decisions and the importance of accounting for management.
He is a diligent financial professional, able to manage the details and turn them into relevant business leading information. He has a strong financial background in construction, technology, consulting services and risk management. He also knows what it takes to create organizations having built teams, grown companies and designed processes for financial analysis and reporting.
His business experience includes:
Creating and preparing financial reporting, budgeting and forecasting.
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Providing insight on financial results and providing advice based on those results.
Jeff also has a long history of helping individuals manage their taxes and plan their finances including:
Income tax planning and strategy.
Filing quarterly and annual taxes.
Audit support.
General financial and planning advice.
Prior to joining the firm in 2015, Jeff was in the private sector where he held senior financial and management positions including Controller and Chief Financial Officer. He has experience across industries, including construction, technology and professional services which gives him a deep understanding of business.
Jeff graduated from Montclair State University, he is a CPA and member of the American Institute of Certified Public Accountants, New York State Society of Certified Public Accountants and New Jersey State Society of Public Accountants.
Jody H. Chesnov, CPA, Managing Partner of Rosenberg Chesnov, has been with the firm since 2004. After a career of public accounting and general management, Jody knows the value of good financials. Clarity, decision making, and strategy all start with the facts – Jody has been revealing the facts and turning them into good business results for more than three decades.
He takes a pragmatic approach to accounting, finance and business. His work has supported many companies on their path to growth, including helping them find investors, manage scaling and overcome hurdles. His experience and passion for business reach beyond accounting and he helps businesses focus on what the numbers mean organizationally, operationally and financially.
He has a particular expertise in early-stage growth companies. His strengths lie in cutting through the noise to come up with useful, out of the box, solutions that support clients in building their businesses and realizing their larger visions.
Prior to joining the firm in 2004, Jody was in the private sector where he held senior financial and management positions including General Manager, Chief Financial Officer and Controller. He has experience across industries, which gives him a deep understanding of business.
Jody graduated with a BBA in Accounting from Baruch College, he is a CPA and member of the American Institute of Certified Public Accountants and New York State Society of Certified Public Accountants.
In addition to delivering above and beyond accounting results, Jody is a member of the NYSCPA’s Emerging Tech Entrepreneurial Committee (ETEC), Private Equity and Venture Capital Committee and Family Office Committee.
He is an angel investor through the Westchester Angels, and has served as an advisor for many startup companies and as a mentor through the Founders Institute.