You may be able to lower your tax bill by giving to charity, but the federal laws have reverted to what they were in 2020. Therefore, you must itemize your deductions on Schedule A to claim charitable donations. Furthermore, you can only take donations up to 60% of your adjusted gross income.
Quid pro quo donations
If you make a cash contribution but get something in return, you can only count the amount above what you would have generally given for the item. For example, if you spend $1,000 to go to a charity ball and would have typically spent $250 to go dancing at that location, you can count $750 as your charitable giving donation.
Donating goods
If you donate clothes, home décor, appliances and other things, you can donate up to the item’s value. For example, if you pay $1.00 for a similar item at a thrift store, you can deduct $1.00. On motor vehicles, including boats and airplanes, tax law says you can deduct fair market value or gross proceeds from its sale as long as the item is worth over $500. You can deduct $500 or the item’s fair market value if it is worth less.
Money donations
If you give money to your favorite charity, you must provide a bank statement or other proof that you gave the money if the amount is under $250. If the amount is bigger, you must get an acknowledgment from the organization receiving your donation.
Specific tax laws limit the amount you can deduct when giving to recognized charities. These laws may be updated again, making it important to follow tax law changes.
