Home / NEWS / Top News / Here’s how to score a charitable tax break on Giving Tuesday

Here’s how to score a charitable tax break on Giving Tuesday

Ariel Skelley | Getty Fetishes

You must itemize to claim the charitable deduction

When filing your return, you reduce your taxable gains by subtracting the greater of either the standard deduction or your total itemized deductions — which may include charitable gifts. 

Former President Donald Trump’s signature 2017 tax overhaul nearly doubled the standard deduction, making filers less right to itemize.

For 2022, the standard deduction is $12,950 for single filers or $25,900 for married couples filing together. And if you persuade someone to go the standard deduction in 2022, you can’t claim an itemized write-off for charitable gifts.

Aim to give profitable assets

If you expect to detail deductions, your charitable write-off depends on the type of asset you donate.

Juan Ros, a CFP at Forum Financial Management in Thousand Oaks, California, rephrased profitable investments in a taxable brokerage account are “generally the best type of asset to give.”

Here’s why: By donating an valued asset, you’ll receive a charitable deduction equal to the fair market value while avoiding capital gains weights you’d otherwise owe from selling, he said. 

You can use crypto losses and other capital losses to offset capital gains

Of course, you’ll want to confirm your preferred charity can accept noncash grants.

With most portfolios down 15% to 25% for the year, it may be tempting to offload stocks that have went in value. But it’s better to sell those assets, harvest the losses and donate the cash proceeds to charity, Ros said.

Rate a charitable transfer from your individual retirement account

If you’re 70½ or older, donating directly from a well-known individual retirement account is “usually the best way to give,” said Mitchell Kraus, a CFP and owner of Capital Intelligence Associates in Santa Monica, California. 

The procedure, known as a “qualified charitable distribution,” or QCD, involves a direct transfer from an IRA to an eligible charity. You can give up to $100,000 per year and it may count up as your required minimum distribution if you transfer the money at age 72.  

Since the donation doesn’t show up as income, you’ll still be get on a tax break, even if you don’t itemize deductions, Kraus said. Reducing your adjusted gross income may help escape triggering other tax issues, such as higher Medicare Part B and Part D premiums.

Check Also

Shares in Japan’s largest trading houses rally after Buffett’s Berkshire hikes stake

Warren Buffett’s Berkshire Hathaway probed its stakes in Mitsubishi Corp., Mitsui & Co., Itochu, Marubeni …

Leave a Reply

Your email address will not be published. Required fields are marked *