Giving Tuesday officially kicks off the season of giving. If you plan to donate to a charity before year-end, you may be wondering how the new tax law affects your tax deduction for charitable donations. Here’s the scoop!
Charitable donations are still tax deductible under the new tax law. Though the new tax law made changes to other itemized deductions, the deduction for charitable donations remains intact and there have not been many changes. That means you can still claim your donations of money and goods as an itemized deduction.
The few changes that were made to the charitable deduction provision are:
The percentage limit of contributions of cash to public charities increased from 50 percent to 60 percent of your adjusted gross income.
- Prior to the new tax law, you were able to claim 80% of the donation for personal seat rights like season tickets for college sports events as a tax deduction, however under the new tax law, you can no longer claim any of the donation as a tax deduction, beginning with your tax year 2018 taxes (the ones you file in 2019).
Standard and Itemized Deductions
Another change that isn’t direct to the charitable deduction provision, but that could impact whether you can still claim charitable contributions if you have before, is how the increased standard deduction impacts whether you now take the standard deduction or itemize your tax deductions. TurboTax estimates that about 90% of taxpayers will now take the standard tax deduction, up from about 70% prior to the new tax law.
For tax year 2018, the standard deduction increased to $12,000 for single filers and $24,000 on a joint tax return. If you file as head of household, your standard deduction is increased to $18,000. And as in the past, you will claim either the standard deduction or itemize your tax deductions based on your eligible tax-deductible expenses and which option gives you the best tax outcome.
You yourself may be in that category of people for whom the increased standard deduction is greater than their itemized deductions and now may have to take the standard deduction. For example, if you have $10,000 in state and local taxes (the new limit for property tax, state and local income taxes, personal property taxes and similar taxes), $8,000 in mortgage interest and $2,000 in charitable contributions, that’s $20,000 of itemized deductions.
If you are single, you’ll itemize your deductions since $20,000 is greater than your $12,000 standard deduction. But if you are filing as a married couple, you’ll no doubt claim the standard deduction of $24,000 instead of itemizing your deductions.
If you are close to the new standard deduction threshold, you can increase your tax deductions and itemize your deductions by donating by the end of the year. You will be helping someone in need and increase your tax refund. You can accurately track and value your charitable donations using TurboTax ItsDeductible and transfer your information to your TurboTax tax return.
Don’t worry about knowing which to chose, TurboTax ask you simple questions about you and gives you the option that you are eligible for based on your entries and that gives you the biggest tax refund.
If you have questions, you can connect live via one-way video to a TurboTax Live CPA or Enrolled Agent to get your tax questions answered. A TurboTax Live CPA or Enrolled Agent can even review, sign, and file your tax return.