Charitable Contribution Deduction: Rules and Changes for 2022 and 2023

How to use your donations to save on taxes

Charitable contribution deduction rules have changed for 2022 and 2023. Or, to be even clearer, they have reverted. The two special tax rules that allowed taxpayers to deduct a certain level of cash contributions even if they didn't itemize 2021 income taxes—and claim deductions of sums up to 100% of their AGI—have expired and were not renewed by Congress.

Charitable contributions are one of the best tax-saving opportunities available. Not only does the charity benefit, but taxpayers enjoy tax savings by deducting part or all of their contributions on their tax returns. For the 2022 and 2023 tax years, rules return to the usual requirements that taxpayers can only deduct charitable contributions if they itemize their tax deductions on Schedule A. In addition, taxpayers can only claim charitable contribution deductions for cash contributions to public charities and operating foundations up to 60% of their adjusted gross income (AGI).

Key Takeaways

  • For a charitable contribution to be deductible, the recipient charity must be a qualified organization under the federal tax law.
  • Annual AGI caps limit the total amount of charitable contribution deductions.
  • Special rules limit certain deductions based on the type of property donated and the type of tax-exempt organization receiving the donation.
  • In 2022, taxpayers must return to itemizing their deductions on Schedule A in order to take a charitable tax deduction. The special 2021 rules were not extended.
  • For 2022, the usual 60% of AGI ceiling on charitable cash contributions to qualified charities has been restored.

The Basics of the Charitable Contribution Deduction

The tax treatment of a charitable contribution varies according to the type of contributed asset and the tax-exempt status of the recipient organization. Rules differ for individuals, businesses, and corporate donors. Also, the amount of the deduction is subject to standards and ceilings.

Which Donations Qualify for Deductions?

Tax law requires that deductions are allowed only for contributions that serve a charitable purpose. A recipient organization must qualify for tax-exempt status as required by the tax code and determined by the Internal Revenue Service (IRS).

The list of eligible entities includes organizations operated exclusively for religious, charitable, scientific, literary, or educational purposes; the prevention of cruelty to animals or children; or the development of amateur sports. Donations to nonprofit veterans’ organizations, fraternal lodge groups, cemetery and burial companies, and certain legal corporations can also qualify, but only if
the donations are designated for eligible purposes.

The IRS Tax Exempt Organization Search tool can help verify an organization’s tax-exempt status and determine its eligibility for deductible contributions. A donation to a federal, state, or local government may be eligible if the gift is earmarked for public purposes (such as maintaining a public park). Gifts to benefit a particular individual, for-profit business, or private interest do not qualify as deductible charitable contributions.

For 2022 a, charitable contributions must be claimed as itemized deductions on Schedule A of IRS Form 1040 under "Gifts to Charity."

'Quid Pro Quo' Contributions

For certain donations, some calculation is required to determine the amount that can be deducted. These include “quid pro quo” donations for which the donor receives an economic benefit—e.g., goods or services—in return for the gift.  

For example, if a donor receives a T-shirt in return for making a donation, the deduction is limited to the amount of the contribution that exceeds the fair market value of the shirt. So, if the contribution is $40, and the fair market value of the T-shirt is $20, the deductible amount is $20 (the $40 donation minus the shirt’s $20 value).

The same rule applies for contributions for events like charity dinners, for which the fair market value of the meal must be subtracted from the cost of the event to determine the amount of the deduction.

Deduction for Donated Goods Set at Fair Market Value

Charitable contribution deductions are allowed for donations of goods—such as clothes and household items—to Goodwill, the Salvation Army, and similar charities. Used clothing and household items must be in usable good condition, and the deduction amount is limited to an item’s fair market value at the time of contribution—for example, its thrift-store price.

Special rules apply to vehicle donations. If the fair market value of a vehicle (either a car, a boat, or an airplane) is more than $500, you can deduct the smaller of:

  • The gross proceeds from the sale of the vehicle by the organization, or
  • The vehicle's fair market value on the date of the contribution.

Conversely, if the qualified donee sells the vehicle for $500 or less, you can deduct the smaller of:

  • $500
  • The vehicle's fair market value on the date of the contribution.

When a taxpayer claims more than $500 in total deductions for non-cash contributions, they must file IRS Form 8283 with their tax return. Some tax preparation software packages include calculators to help determine the fair market value of various items. IRS Publication 561  is a useful resource to help you decide the value of your non-cash contributions.

Records To Substantiate Contributions

Taxpayers must keep detailed records to substantiate their charitable deductions. The type of record depends on the type and amount of the contribution: cash, non-cash, and out-of-pocket expenses while donating your services.

Cash Contributions

Cash contributions include donations made by cash, check, electronic funds transfer, online payment services, debit cards, credit cards, payroll deduction, or a transfer of a gift card that can be redeemed for cash. To deduct a cash contribution of any amount, you must have at least one of the following:

  • A bank record that shows the name of the qualified organization, the date of the contribution, and the amount of the contribution. Bank records may include canceled checks, bank statements, credit card statements, and electronic funds transfer receipts
  • A receipt or written communication (including email) from the organization that shows the organization's name and the amount and date of the contribution
  • Payroll deduction records (for example, a pay stub or W-2) that show the organization's name and the amount and date of the contribution.

Cash contributions over $250 must be supported by a written acknowledgment from the organization stating the amount of the contribution, whether the organization gave any goods or services to the donor as a result of the contribution, and a description and good faith estimate of the value of any such goods or services. Significant property contributions also require appraisals.

Non-Cash Contributions

Substantiation requirements for non-cash contributions vary depending on the value of the donation:

  • Less than $250: A receipt from the organization showing the organization's name, the date and location of the contribution, and a description of the property.
  • Between $250 and $500: "Contemporaneous written acknowledgment" of the contribution from the organization—the acknowledgment must be written and include a description of the property, whether the organization gave you any goods or services as a result of the donation, and a description and good faith estimate of the value of any such goods or services provided to the donor. Must be received by donor the earlier of date of filing return for year of donation or due date, including extensions.
  • Over $500 to $5,000: Contemporaneous written acknowledgment and you must file Form 8283 with your tax return.
  • Over $5,000: Contemporaneous written acknowledgment, a written appraisal of the property from a qualified appraiser, and filing Form 8283 with your tax return.

Out-of-Pocket Expenses

To deduct out-of-pocket expenses related to volunteer activities, you must have an acknowledgment from the organization that contains:

  • A description of the services you provided to the organization
  • A statement of whether the organization gave any goods or services to the donor as a result of the contribution
  • A description and good faith estimate of the value of any such goods or services.

Standard Deductions for 2022 and 2023 Taxes

The 2022 standard deduction is set at $25,900 for joint returns, $12,950 for single individuals and married people filing separately, and $19,400 for heads of household.

For the tax year 2023 (returns are typically filed in 2024), the standard deduction goes up considerably, due to inflation. The standard deduction for married couples filing jointly for the tax year 2023 is $27,700. For single taxpayers and married individuals filing separately, the standard deduction rises to $13,850, and for heads of households, the standard deduction will be $20,800 for the tax year 2023.

In 2022, married filing jointly and married filing separately taxpayers who are at least 65 years old or blind can claim an additional standard deduction of $1,400; filers who are unmarried and not a surviving spouse can claim an extra $1,750. In 2023, those amounts go up to $1,500 and $1,850.

An individual who is both over 65 and blind is entitled to double the additional amount in 2022 and 2023. State and local tax deductions are capped at $10,000 ($5,000 if married and filing separately) in both 2022 and 2023.

Non-Cash Gifts

For non-cash contributions and gifts to non-qualifying organizations—which include private non-operating foundations, supporting organizations, donor-advised funds, and other charitable organizations that do not qualify as public charities—total deductions continue to be capped at 20% to 50% of the taxpayer’s AGI. The percentage depends on the type of property and tax status of the donee organization.

Non-cash contributions to qualifying organizations, i.e., public charities and operating foundations, are capped at 50% of the individual donor’s AGI. Non-cash donations to non-qualifying entities, i.e., non-operating foundations and certain other entities, continue to be capped at 30% of the individual donor’s AGI. Also, contributions of appreciated capital gain property are generally capped at 30% of the AGI if made to qualifying organizations, and 20% of the AGI in the case of non-qualifying organizations.

Special Rules for Specific Circumstances

The tax code contains a many special provisions for specific categories of donors and different types of donations. The rules may vary for personal and business contributors; special allowances and standards can affect taxpayers engaged in particular activities, such as farmers, ranchers, or whaling captains supporting Native Alaskan subsistence whaling. Contributions of a wide range of properties including, but not limited to intellectual property, conservation easements, food inventories, and property for scientific research, are subject to special requirements.

For most taxpayers who make modest cash gifts to charity, the basic rules on charitable deductions are fairly straightforward. These individuals generally are not concerned with ceilings on annual deductions or esoteric property gifts.

However, the complexity and variety of tax rules for charitable contributions that are significant or entitled to unique treatment may offer alert taxpayers substantial opportunities for tax savings. They also may constitute traps for the uninformed. In addition, special legislation may be enacted to address disasters and economic crises. Accordingly, it is in taxpayers' own best interest to keep abreast of tax news and to consult expert advisors when dealing with special circumstances and significant contributions.

Is the $300 Deduction for Nonitemizers Available for 2022 or 2023?

No. The special deduction that allowed single nonitemizers to deduct up to $300—and married filing jointly couples to deduct $600— in cash donations to qualifying charities has expired.

How Much Can Taxpayers Who Itemize Deduct for Charity?

Individual itemizers are allowed to deduct up to 60% of their adjusted gross incomes (AGI) for cash donations to qualified charities. Lower ceilings apply for certain property contributions and donations to organizations not qualifying as public charities. The 2021 rule that allowed deductions for cash contributions equal to 100% of individuals' AGI has expired.

Corporations also lost their increased ceiling for cash charitable contributions. The corporate ceiling has returned to 10% of taxable income. [In 2021 the ceiling for cash donations increased to 25% of taxable income (with some adjustments) for “C” corporations.]

If I Pay $500 for a Ticket to a Dinner Held to Raise Money for a Charity, Can I Deduct the Full $500?

No. You cannot deduct the full $500. Your deduction is limited to the amount that you paid for the ticket minus the value of the dinner. If the dinner is valued at $200, you can deduct $300, i.e., $500 - $200 = $300. Usually, the deductible amount is indicated on the ticket, but, in any event, the charity must send you a written acknowledgement of your contribution that will say you paid $500, but received goods or services worth $200,

The Bottom Line

In response to the financial pressure and economic uncertainty, taxpayers received a special opportunity from Congress to benefit from tax savings by deducting all or part of their charitable contributions on their tax returns for tax years 2020 and 2021. This was a special temporary rule, however. and the more generous special deductions are no longer allowed.

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