The term charitable contribution generally refers to a gift of cash or property made to a nonprofit organization to help it accomplish its goal. As the 2022 year draws to a close, attention may go to making last-minute charitable contributions. Year-end support is of special consideration, especially in tough economies, to help specific charities stay viable or hit financial objectives. The donor does not get anything back in exchange for cash or property given, but, in the United States, charitable donations can be deducted from individual or company federal tax returns. Here are a few beneficial things to know.
When a person or business makes a year-end contribution, with this current year-end defined as on or before December 31, 2022, a deduction can be taken on the 2022 tax return. This even applies to donations such as cars or boats, however, a written acknowledgment is necessary to show that those types of donations were indeed made and in what year. Donations made within the new year, meaning in 2023, will apply to the 2023 tax return. There are some reasons why folks may want to donate sooner rather than later as the timing of donations affects the year one may be eligible for a deduction. So, for example, if you’re in a high tax bracket this year, it might be worthwhile to make the donation sooner rather than wait. And, for those who don’t itemize deductions, there is still a small charitable deduction available.
Schedule A (Form 1040 or 1040-SR) is used by individual U.S. taxpayers to itemize deductions when filing a tax return. The form is an optional attachment to the standard 1040 form that taxpayers use to report annual income taxes. It is used by taxpayers who are not seeking a standard deduction. It’s important to note that tax laws are subject to yearly changes. Thus, if you are thinking of making charitable contributions in the form of cash or property, your CPA, a qualified tax professional, is the best resource for information on charitable contributions and other important tax related topics.