Key Takeaways:

  • Donations to qualified charities are typically only fully tax deductible if you itemize.
  • Bunching contributions planned over multiple tax years into one may bump you over the standard deduction, enabling you to claim the full value of charitable deductions.
  • Planned giving using a donor-advised fund can be a useful tool for bunching contributions.

Americans are charitable by nature. According to Giving USA 2022: The Annual Report on Philanthropy for the Year 2021, U.S. individuals were estimated to have made almost $327 billion in charitable gifts.

This #GivingTuesday, you’re likely receiving a slew of solicitations from charities seeking donations before the calendar year end.

Yet, it’s worth pausing to consider if you should write a check today or wait until January 1.

A few days makes little difference to the cause you are supporting. Yet planning your giving over multiple years and bunching the gifts in one tax year can be a powerful way to ensure you’re realizing the full value of charitable tax deductions.

You Must Itemize to Deduct Charitable Gifts

In 2022, charitable gifts are fully deductible only when itemizing your tax returns. Because of the changes in the 2017 Tax Cuts and Jobs Act, many tax filers no longer itemize deductions.

Will you?

Standard Deduction
Filing Status


2022


2023


Single;
Married Filing Separately
$12,950 $13,850
Married Filing Jointly;
Surviving Spouse
$25,900 $27,700
Head of Household $19,400 $20,800

Note that it’s likely that your itemized deductions will be higher than the standard deduction if you own property on which you pay significant mortgage interest and property taxes, pay meaningful local and state taxes, and have sizeable charitable contributions.

Bunching Charitable Contributions

If you’re on the cusp of itemizing, one of the ways you can get the full value of charitable tax deductions is to bunch gifts into one calendar year, increasing the dollar amount of donations enough to get over the standard deduction.

When itemizing contributions to public charities in 2022, an individual may deduct up to 60% of adjusted gross income (AGI) for cash contributions and 30% of AGI for non-cash contributions, such as for appreciated securities.

Note that when gifting low-basis stock or other securities held for more than one year, you can deduct the full value without paying capital gains taxes on any appreciation.

Simplified Bunching Example: Married, Filing Jointly

Deductions


2022


2023


TOTAL


Charitable Gifts $10,000 $10,000 $20,000
Other Deductions $15,000 $15,000 $30,000
Higher Deduction: $25,900 $27,700 $53,600

 

 Deductions


2022


2023


TOTAL


Charitable Gifts $20,000 $0 $20,000
Other Deductions $15,000 $15,000 $30,000
Higher Deduction: $35,000 $27,700 $62,700

Using a Donor-Advised Fund to Plan Charitable Gifts

What if you know that you want to donate to charity, yet you haven’t decided on the specific causes to support?

Donor-advised funds enable you to bunch long-term planned giving into a single irrevocable gift. By doing so, you deduct the full gift in the tax year in which it was made. At a future date, you can make requests for distributions to the charitable causes most important to you.

LEARN MORE: AMG Charitable Gift Foundation

With today’s more attractive market valuations, such gifts are even more compelling as the donated amount can be invested and any future appreciation would not be taxable to you or the charity.

Giving While Living

Note that donations to qualified charities do not affect either your annual gift tax exclusion or your lifetime gift tax exclusion.

In 2022, each taxpayer can gift up to $16,000 to any number of people they like without it affecting their lifetime gift tax exemption nor requiring a gift tax return. Your spouse can also gift the same amount, doubling the exclusion per household. This is a “use it or lose it” exclusion that expires each calendar year.

If one exceeds the annual gift tax exemption, over a lifetime each taxpayer can count those gifts against a $12,060,000 lifetime gift tax exemption (as of 2022) without it triggering federal gift tax. Your spouse can also gift the same amount.

In Summary

Should you be financially secure and inclined to make gifts to charity and family, doing so through thoughtful recognition of charitable contributions and use of the annual and lifetime gift tax exclusions can potentially lower your taxes meaningfully and supply more financial resources to the people and causes most important to you.

Integrating estate and tax planning with decades-long financial security analyses and investment forecasting is a key benefit of AMG’s comprehensive wealth management.

Should you wish to learn more about AMG’s Personal Financial Management or to speak with an AMG advisor, contact us: 800-999-2190 or info@amgnational.com.

CONTACT US

This information is for general information use only. It is not tailored to any specific situation, is not intended to be investment, tax, financial, legal, or other advice and should not be relied on as such.
AMG’s opinions are subject to change without notice, and this report may not be updated to reflect changes in opinion. Forecasts, estimates, and certain other information contained herein are based on proprietary research and should not be considered investment advice or a recommendation to buy, sell or hold any particular security, strategy, or investment product.

Related Articles

See All

Keep Your Powder Dry, the Time To Shoot Is Coming

November 3, 2022
2 min read
Brief: Wealth Management
Read More

Five Investing Mistakes to Avoid

October 4, 2022
1 min read
Brief: Financial Markets & Investing, Wealth Management
Read More

Will or No Will, Check Your Beneficiary Designations

August 25, 2022
3 min read
Brief: Trusts & Estate Planning, Wealth Management
Read More

Get the latest in Research & Insights

Sign up to receive a weekly email summary of new articles posted to AMG Research & Insights.