Charitable Contributions for 2022: How to Save on Taxes

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In 2020 and 2021, you could deduct up to $300 for cash donations to charity without itemizing. This came under the standard deduction. It didn’t apply to those who itemized, but at least you could take a deduction without pulling out Schedule A.

But that charitable standard deduction wasn’t extended past 2021. So that leaves you to itemize deductions for charitable donations. But what types of contributions work best for deductions, and how can you give and save money?

Donate Non-Cash Assets

It’s the end of the year, and you want to make a charitable contribution to offset your taxes. If you have non-cash assets, you may be tempted to sell some and donate them to a worthy charity. But there’s a better way to do this.

If you have held the assets for more than a year and they have appreciated, you’ll need to worry about capital gains taxes. But there is an alternative to selling the assets.

Donate the appreciated non-cash assets to the charity. By not selling them, you avoid capital gains taxes, which can be 15 to 20 percent depending on your income. Because the capital gains taxes have not come off the top, the result is a more significant gift to the charity. A larger gift equates to a potentially bigger tax write-off.

Sit down with your accountant or tax attorney and run the numbers.

Merge Donations Into One Tax Year

Although President Trump’s Tax Cuts and Jobs Act (TCJA) of 2017 ceases in 2025, you can now use it to expand your charitable donations tax deductions. The TCJA increased the standard deduction for single filers to $12,950. Joint filers can claim $25,950.

If you’re itemizing charitable deductions, combine two years of itemized deductions, and then in the second year, take the standard deduction.

For example, if you’re a married couple donating $10,000 yearly and deducting it on your income tax return, donate $20,000 for 2022 and write it off on your 2022 taxes. Then in 2023, take the $25,950 standard deduction. This gives the couple additional tax deduction over the two years.

Make sure you run this strategy by your accountant or tax attorney to see if this is right for your circumstances.

Alternative Minimum Taxes Might Be Offset

Making additional charitable donations and itemizing them could reduce the difference between alternative minimum tax (AMT) and regular income tax. But if you are inclined to donate, waiting until you are no longer in AMT might be more advantageous. Check with your accountant.

Rebalance Your Portfolio

Savvy investors like a balanced portfolio. It guards against market fluctuations that can hurt when you have all your eggs in one basket.

When rebalancing a portfolio, an investor must often sell assets that are performing well. This generates a capital gains tax. Instead, use part of your portfolio as a donation and take the tax write-off. Then use the tax savings to reinvest in your portfolio. You’ve balanced your portfolio, donated to a worthy cause, and saved money. Talk to your accountant and see if this is the right course of action for you.

Multi-Year Deductions for High Income Years

You inherited a lot of money, or that big sales bonus came through; regardless of the circumstance, you’re flush with cash. How do you relieve your tax burden? Carry charitable contribution deductions forward for up to five years.

You’ll have to claim the maximum in the current tax year, but then you can carry forward any unused deductions. This lets you front-load in a high-income year. Talk to your accountant if you are having a high-income year.

Qualified Charitable Distribution for Those Over 70

A qualified charitable distribution (QCD) can help you save money on your taxes if you’re 70.5 or older.

A QCD distributes funds from your IRA to a qualified charity. This works well because those fund holders must draw a minimum amount annually. This amount is taxed.

For example, if you are required to withdraw $10,000 from your IRA, you will be taxed on that amount. But if you contribute $2,000 to a charity, you will be taxed on the remaining $8,000. The $2,000 will give you a tax deduction. Depending on your tax bracket, this could be significant. Talk to your accountant to make a strategy.

Limits to Deducting Charitable Donations

There is a limit to the amount of charitable funds you can donate.

In 2021, the limit was 100 percent of an individual’s adjusted gross income (AGI). But that has decreased to around 50 percent of an individual’s AGI for cash contributions. But for non-cash contributions, like stock or donating a car, the limit is 30 percent of an individual’s AGI.

Choose a Qualified Charity

You can’t donate to a GoFundMe charity and expect to be able to deduct it from your taxes. You'll need to find a qualified charity as defined by the IRS. Here is a map highlighting each state and the approved charities.

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