The Tax Cuts and Jobs Act (TCJA) makes it harder to benefit from your donations.
Let’s say you donate $10,000 to a church, school, or other 501(c)(3) charity:
Will you get a tax deduction—in other words, will you itemize?
Will you benefit from the entire $10,000 as an itemized deduction? In other words, did the $10,000 simply put you over the hump that beat the standard deduction?
Say you can deduct all $10,000 as an itemized deduction. Would making it a business deduction increase the tax benefit value to you?
The TCJA made two big changes that make it less likely that you will itemize. First, the TCJA set a $10,000 limit on your state and local income and property tax deductions. Second, it increased the 2020 standard deductions (adjusted for inflation) to
$12,400 for individuals, and
$24,800 for married couples filing jointly.
Even if you make a big donation, think about the problem this creates—suppose you are married and donate $17,000 to charity. If this is your only itemized deduction, your donation does you no good because it’s less than $24,800.
Fortunately, there’s a much more tax savvy way to give.
As a business owner, you can make a few modifications and convert your church, school, and other 501(c)(3) donations to a ... Log in to view full article.