Under the new tax reform law – the Tax Cuts and Jobs Act (TCJA) – many itemized deductions are being eliminated or curbed, beginning in 2018. But the deduction for charitable contributions was spared.
In fact, the new law even includes a slight improvement in the rules. For clients who will still itemize in 2018, the annual deduction limit for gifts to public charities and private foundations is raised from 50% of adjusted gross income (AGI) to 60% of AGI.
At the same time, however, the TCJA wipes out the current deduction for 80% of the cost of contributing to college booster clubs for the right to buy preferred seating at athletic events. As for charitable deductions claimed on 2017 returns filed this year, the prior rules remain in place.
Here are five common situations when clients may benefit tax-wise from their generosity. Advise them accordingly:
1. Monetary contributions: If you donate cash or make a cash-equivalent contribution to a qualified charitable organization, you can generally deduct the full amount of the contribution, subject to the annual limit of 50% of AGI (increasing to 60% in 2018). Any excess may be carried over for up to five years.
However, the tax law imposes tough recordkeeping rules for monetary contributions. For a cash donation of $250 or more, you must obtain a contemporaneous written acknowledgment from the charity. Usually, the charity is perfectly willing to comply with this requirement.
About Ken Berry
Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a wide variety of newsletters, magazines, and other periodicals.