A NEW tax rule will allow millions of joint filers to deduct up to $2,000 in cash donations.
The move comes after President Donald Trump’s “big, beautiful bill” permanently increased the standard deduction.
The new tax law increasing the standard deduction will begin in 2026[/caption]
However, the rule also adds a universal charitable deduction for specific taxpayers called “non-itemizers.”
The change, which will start in 2026, allows individual taxpayers to deduct up to $1,000 in cash donations and $2,000 if they’re filing jointly as a married couple – even if they don’t itemize.
Before the new rule, this specific tax break typically served top earners.
The move now will switch as lower earners will benefit.
Come next year, high-income donors will now face deductible donation limits.
Those in the highest tax bracket will have their deduction capped at 35% instead of 37%.
A LITTLE HISTORY
Back in 2017, the standard deduction was nearly doubled for non-itemizers.
For context, non-itemizers are those who take the standard deduction on their tax return instead of listing out, or itemizing, deductions.
This includes things like medical costs, charitable donations, state and local taxes, and more.
Itemizers are those who list specific expenses in order to reduce taxable income.
Most Americans are nonitemizers as the standard deduction is usually quite high, giving a better tax break – unless you have lots of deductible expenses.
The changes from 2017 meant more taxpayers took the standard deduction and they could no longer list charitable donations, getting a big tax break.
The move dropped itemized charitable deductions by almost $66 billion, according to the Giving USA Foundation and Indiana University.
However, this new law encourages the opposite.
Tips for Charitable Contributions
Charitable contributions may help lower your tax bill.
Just be sure that they are made to qualified organizations.
The IRS revealed eight tips to help ensure contributions pay off on your tax return.
- If your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Also, you cannot deduct contributions made to specific individuals, political organizations and candidates. See IRS Publication 526, Charitable Contributions, for rules on what constitutes a qualified organization.
- To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A.
- If you receive a benefit because of your contribution such as merchandise, tickets to a ball game or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received.
- Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible. Special rules apply to vehicle donations.
- Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.
- Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. For text message donations, a telephone bill will meet the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution, and the amount given.
- To claim a deduction for contributions of cash or property equaling $250 or more you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more. If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
- Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.
source: The IRS
HOW YOU’RE IMPACTED
Just remember that this tax break is for those who don’t itemize deductions on Schedule A – but there are limits.
The gifts or donations must be cash.
This means things like clothing, furniture, stocks don’t count.
Plus, the donations must be giving to qualified charities like a church or school.
And note, while the deduction will reduce your taxable income, it will not boost your adjusted gross income, or AGI.
AGI is a number that determines your tax liability.
It’s calculated by taking your gross income from and subtracting eligible deductions, also known as above-the-line deductions.
