Episode 68: In this episode, Timalyn continues the discussion begun in Episode 64 about the One Big Beautiful Bill Act.
Today, she's explaining the charitable contribution deduction and the changes that have been made to it under the One Big Beautiful Bill Act.
What is a charitable contribution?
Charitable contributions are money or property that are given to a 501(c)(3) nonprofit organizations, religious organizations, educational institutions, fraternal organizations, public cemeteries, and certain government organizations.
The IRS has a search tool that can be used to look up tax-exempt organizations.
Charitable Contributions Deduction
The IRS allows taxpayers to receive a deduction for the charitable contributions they give to qualified organizations. This deduction lowers the taxpayer's taxable income. In the past this deduction has been reserved for taxpayer's who itemize deductions.
During COVID taxpayers who didn't itemize could receive a partial charitable contribution deduction .
The One Big Beautiful Bill Act brings this back with an increased amount. Taxpayers who do not itemize can still deduct up to $1,000 of their charitable contributions ($2,000 if married filing jointly).
For those who do itemize the One Big Beautiful Bill Act introduces a floor to this deduction. Taxpayers can deduct the amount they have given that is over .5% of their adjusted gross income (AGI). Timalyn uses the example of a taxpayer having an AGI of $100,000. .5% of that is $500. That means the taxpayer can deduct the amount they have given to charitable organizations that is over $500.
Donation Tax Deduction Limit
The amount that can be deducted for charitable contributions is not unlimited. For cash donations it is limited to 60% of the taxpayer's adjusted gross income. So, for the taxpayer who has an AGI of $100,000 they cannot deduct more than $60,000 in cash donations for the current tax year.
If the taxpayer has given more than 60% of their AGI in charitable contributions the amount that exceeds the limit rolls over to the next year. This does not apply to those who will take the partial charitable contribution deduction.
Deductions given to private foundations and cemetery organizations are limited to 30% of taxpayer's adjusted gross income.
Charitable Contribution Record Keeping
Taxpayers are responsible for keeping track of their donations. For any cash donation of $250 or more a contemporaneous statement from the organization is required to substantiate the deduction.
If volunteering the value of the taxpayer's time may not be deducted. However, the mileage they drive with their personal vehicle can be deducted at 14 cents per mile (2025). Also the direct costs associated with volunteering may be deducted.
For non-cash donations of at least $500 written acknowledgement from the organization from the charity and Form 8283, Noncash Charitable Contributions is required.
For non-cash donations valued at $5,000 or more a qualified appraiser must do an appraisal of the property, complete section B of Form 8283, and sign it along with someone from the charity.
Need Tax Help Now?
If you need answers to your tax debt questions, book a consultation with Timalyn via her Bowens Tax Solutions website. Click this link to book a call.
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Remember, Timalyn Bowens is America's Favorite EA, and she's here to fill the tax literacy gap, one taxpayer at a time. Thanks for listening to today's episode.
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Disclaimer: This podcast is for informational and educational purposes only. It provides a framework and possible solutions for solving your tax problems, but it is not legally binding. Please consult your tax professional regarding your specific tax situation.
