Charitable contributions

Stumpjumper

My wife and I set up a donor advised fund at a local community foundation. last year my AGI was 52,000 dollars, yet I could not afford to make a large enough contribution to affect my taxes, the standard deduction was the better choice. Apparently only a portion of this kind of charitable donation has an impact on your tax return. Any ideas on what the AGI would need to be before a donation had an effect on my taxable income? Or maybe what is the relationship of the AGI to donor advised gifts? I think during Covid the rules were relaxed.

rachels

Hi Stumpjumper,

The limiting factor in your situation seems to be your total itemized deductions amount, not your AGI. For 2024, the standard deduction for Married Filing Jointly is $29,200. In order to use your charitable donations, you'd typically want your total itemized deductions (donations, state and local income taxes, home mortgage interest, medical expenses, etc.) to exceed $29,200. For example, if you paid $10,000 in state income tax, made a $15,000 charitable donation, and paid $12,000 in mortgage interest, your total itemized deduction amount would be $37,000. In that case, you would want to take your itemized deductions, which include your charitable donations.

You are correct that during Covid, the IRS allowed taxpayers to deduct a small charitable donation, even if they took the Standard Deduction. That was an exception, though, and is no longer allowed.

Stumpjumper

Thanks Rachel, but aren't gifts of stocks, mutual funds, or other securities limited to 30% of your AGI? So if your only item to itemize (no state or local taxes, no mortgage interest) is that 15000 and your AGI is only 42.000 dollars won't that limit your deduction to $12,600. I am 70, and we file jointly. Our standard deduction, If I'm correct, is $31,150. So, to beat the standard deduction with only having securities to donate, would we not need an AGI of right around $105,000 to beat the standard? Thanks, Bill

AndyS

You are correct, in general only 30% of capital gain property is allowed as a deduction unless you meet the exception for the 50% limit. I have included the link below where you can determine your situation. So yes, if your income is $42,000, you would be limited to a $12,600 deduction. You would need to have additional itemized deductions in other areas in order to bring your itemized deductions higher than the IRS standard deduction. That being said, depending on the state you live in, I would still recommend entering your itemized deductions. If your state uses them, they will be rolled to your state return to help as deductions there.

https://www.irs.gov/publications/p526#en_US_2023_publink100017780

Stumpjumper

Thanks again Andy, I am in PA and don't' believe any would roll over.

Stumpjumper

I will check out the link.

Stumpjumper

Carumba, Andy… the information at that link has my head spinning!