{"id":10101,"date":"2023-11-29T15:40:39","date_gmt":"2023-11-29T23:40:39","guid":{"rendered":"https:\/\/www.soundcu.com\/?p=10101"},"modified":"2024-02-27T15:50:48","modified_gmt":"2024-02-27T23:50:48","slug":"save-on-taxes-by-batching-your-charitable-donations","status":"publish","type":"post","link":"https:\/\/www.soundcu.com\/blog\/save-on-taxes-by-batching-your-charitable-donations\/","title":{"rendered":"Save On Taxes By “Batching” Your Charitable Donations"},"content":{"rendered":"
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Save On Taxes By “Batching” Your Charitable Donations<\/h2>\n

At year-end, many people look to make the most of our charitable contributions, not only so that we can help the people or causes most in need, but also so we can see the most benefit on our taxes. When we make a charitable contribution to a qualified 501c3 non-profit organization, we may be able to take a tax deduction for our donation. But how does it work,? And how might it change in the near future?<\/p>\n

In 2017, the US passed the Tax Cuts and Jobs Act. This law substantially increased what\u2019s called the \u201cstandard deduction\u201d \u2014 the dollar amount each person can deduct from your taxable income every year, in order to reduce how much you pay in taxes to the IRS. Prior to the passage of that law, many people \u201citemized\u201d on when they filed their taxes. They added up all of their deductions; not just for charitable contributions, but qualifying medical bills, mortgage interest, state and local taxes and other things. If they exceeded what was then a smaller standard deduction, they itemized. After the law passed? Not so much.<\/p>\n

For the 2023 tax year, the standard deduction for taxpayers is $13,850 for single-filers and $27,700 for couples. This means that you\u2019d need to have more than that amount in itemized deductions in 2023 in order to make it worthwhile for you to itemize things.\u00a0 And while some of us may have itemized medical expenses or mortgage interest that will push us over that threshold, many of us won\u2019t come close to topping those dollar amounts. Roughly 90 percent of people no longer itemize.<\/p>\n

The fact that smaller charitable contributions no longer \u201ccount\u201d as tax deductible write-offs has hurt charities. Nearly 5 million fewer people gave to charity in 2022 than in 2019, according to Charities Aid Foundation.<\/a> From 2021 to 2022, charitable giving dropped by 3.4% overall, according to The Lilly Family School of Philanthropy<\/a>.<\/p>\n

But if you want to give and reap the rewards on your taxes, there\u2019s a workaround. Batching your donations and other deductions; in other words, loading more of them into a single calendar year.<\/p>\n

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First, Understand What Qualifies As a Donation<\/strong><\/h3>\n

According to the IRS, a donation or gift is considered tax-deductible if it’s made to a recognized 501c3 charitable organization. While not all 501c3 non-profits are charities, any organization operating as a charity must be a 501c3 in order for you to get a tax write-off for the donations you make.<\/p>\n

Any donation you make must be made during the tax year in order for it to be deductible on your taxes for that year. In other words, you can\u2019t make a donation in 2023 and write off in 2025.\u00a0 And if you donate property such as real estate, furniture, or a used car, you can only deduct what\u2019s known as \u201cfair market value\u201d of the property, per IRS rules. In other words, if you donate a car to charity<\/a>, you can\u2019t say it\u2019s worth $20,000 when you could probably only get $2,000 for it if you sold it based on its condition and market trends.<\/p>\n

For those of us who have several donations we\u2019d like to make or a few deductions to take for things like medical expenses or mortgage interest, it may make financial sense to lump them into a single calendar year.<\/p>\n

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Combining Your Charitable Gifts<\/strong><\/h3>\n

Essentially, you\u2019d look to make big charitable gifts in alternate years, or even every 3-5 years, in order to donate enough so that you climb over the standard deduction threshold, which allows you to itemize your deductions for a bigger tax break. This strategy used to be called \u201clumping\u201d or \u201cclumping\u201d and is now often referred to as \u201cbatching\u201d or \u201cbundling.\u201d<\/p>\n

If you tend to make bigger contributions to nonprofits that are tax-deductible, but you don’t have a ton of other deductible items like mortgage interest, you might be losing out on reducing your taxable income, unless you batch donations.<\/p>\n

Then in your off, unbatched years, you would simply take the standard deduction on your taxes and set aside the gift money for your next batched one.\u00a0 And if you find you still need a bigger bump to get you over the standard deduction threshold, take a look at everything you may have to deduct, including state and local taxes and mortgage interest, and medical expenses. It may be that in a year with a large medical bill, it finally makes sense to bundle your charitable contributions to get the most bang for your buck.<\/p>\n

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The Bottom Line <\/strong><\/h3>\n

Before you choose a strategy, chat with your tax preparer and let them know what you\u2019re planning, as they may be able to offer helpful strategies that will help set you up for success in the years you bundle your deductions.<\/p>\n

Also, remember to take careful notes on all of the donations you make to charity and keep all your receipts when you do so. The IRS will require proof of the donations you make to qualified 501c3 charities in the same way that they need to see receipts for qualified medical expenses.<\/p>\n

Finally, note that this may all change in the very near future.\u00a0 Many of the provisions of the Tax Cuts and Jobs Act are set to sunset in the next few years, to go back to closer to what they were before.\u00a0 The standard deduction is one of them. The standard deduction is expected to be reduced by about half in 2026. Combine this with other provisions that are expiring (like the cap on SALT or State And Local Taxes) and it will once again make sense for more people to itemize.<\/p>\n<\/div>\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\n\t<\/div>\n<\/div>\n\n\n

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Disclosures<\/h2>\n\t\t
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For tax or legal guidance, please consult with a qualified professional. Information shown is for general illustration purposes and does not predict or depict the performance of any investment or strategy.<\/div>\n\t\t<\/div>\n\t<\/div>\n\n\t<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

As the year-end approaches, many want to make the most of their charitable contributions; both to help those in need and to benefit from tax deductions. Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":13,"featured_media":10102,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","_searchwp_excluded":"","footnotes":""},"categories":[50],"tags":[],"class_list":["post-10101","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-life-finances"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.soundcu.com\/wp-json\/wp\/v2\/posts\/10101","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.soundcu.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.soundcu.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.soundcu.com\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/www.soundcu.com\/wp-json\/wp\/v2\/comments?post=10101"}],"version-history":[{"count":1,"href":"https:\/\/www.soundcu.com\/wp-json\/wp\/v2\/posts\/10101\/revisions"}],"predecessor-version":[{"id":10103,"href":"https:\/\/www.soundcu.com\/wp-json\/wp\/v2\/posts\/10101\/revisions\/10103"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.soundcu.com\/wp-json\/wp\/v2\/media\/10102"}],"wp:attachment":[{"href":"https:\/\/www.soundcu.com\/wp-json\/wp\/v2\/media?parent=10101"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.soundcu.com\/wp-json\/wp\/v2\/categories?post=10101"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.soundcu.com\/wp-json\/wp\/v2\/tags?post=10101"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}