Donating money to a good cause can lift our spirits, but can it also reduce our tax burden? What if we don’t donate to a charity, but to a church? Contributions to churches, synagogues, and mosques are tax deductible, as long as your church meets 501(c)(3) regulations set forth by the Internal Revenue Service. Whether you actually benefit from the deduction depends on your record keeping and if you list your deductions.
If you intend to make a charitable donation, a Financial Advisor can help you find out if it’s tax deductible and how it affects your taxes.
Which contributions are tax deductible?
Cash donations and cash donations equivalent to a house of worship are deductible as long as you can prove them and the religious organization meets the reporting requirements. Donating time — like volunteering at a food pantry or organizing a church choir — no tax deductible.
If you are donating something like a piano, you can request a donation receipt corresponding to the value of the piano. This receipt allows you to claim a tax deduction for the value of the donated merchandise, not just the amount of cash you contributed. This is called an in-kind contribution, and the Internal Revenue Service has specific rules for how to calculate the value of property you’ve donated. You can review these rules in IRS Publication 561.
Larger value non-cash contributions such as land or property can be donated and deducted, but there is a limit to the amount you can claim. The limits are based on the type of property being donated, the organization you’re donating to, and your assets. adjusted gross income.
If you are going to donate assets to your religious organization, consult an accountant to best plan for that.
How to request a church donation?
Cash donations are only deducted if you keep track of them. Throwing $20 in the offering plate every now and then won’t help when it’s time to pay taxes. You will need to receive a receipt or written statement from the church you have donated to for cash donations. It must include the name of the church, the amount, the date, and a statement that you did not receive anything in return for your donation.
Cash contributions such as those made through checks, credit, or ACH payments from your bank are much easier to track and claim. But if you’re requesting a donation over $250, you’ll still need to receive a receipt or statement showing where you donated, the date(s) of your donation and the amount(s) of your donation, and with the statement that you did not donate. not receive goods or services for your donation.
Standard Deduction vs. Sectional Deduction
While you can request a donation to a church, synagogue, mosque, or other religious organization, you may not find it worthwhile to do so. You will benefit from knowing that you have supported your favorite religious organization, but you may not benefit from reduce tax burden.
With the passage of the Tax Cuts and Jobs Act of 2017, the standard deduction has been increased significantly. For tax years 2022 and 2023, the standard and itemized deductions are as follows:
Tax return status Tax year 2022 Tax year 2023 Single $12,950 $13,850 Married, filing jointly and qualified widow $25,900 $27,700 Married, filing separately $12,950 $13,850 Head of household $19,400 $20,800
This dramatic increase means fewer households see a benefit in listing their deductions. Center for Urban Tax Policy-Brookings estimates that about 90 percent of American households apply the standard deduction instead of itemizing it.
Under applicable law and policy, the only way to get a tax deduction for a charitable donation is to itemize your tax return. But listing your tax return only makes sense if doing so allows you to claim more than the standard deduction. For the average married household filing jointly, finding deductions of $25,900 or more can be difficult.
In addition to church donations, here are some other common deductions you can claim if you itemize:
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Out-of-pocket medical or dental expenses not covered by insurance that exceed 7.5% of your Adjusted Gross Income (AGI)
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Long-term care premiums in excess of 10% of your AGI
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Mortgage interest and some home equity loans and Home equity line of credit (HELOC) interest
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Property taxes, state taxes and local taxes up to 10%
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Federally declared natural disaster-related casualties and theft, up to 10% AGI
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Unreimbursed job loss, with limitations set forth in IRS Publication 2106
Tax planning strategy
One strategy to be able to claim church donations is to make a one-time donation. If you have years that you can itemize for other major expenses, you can donate more during those years.
Even if you don’t have additional costs to justify itemizing, you can still plan your contributions so you can benefit from the deductible. For example, you can donate more every odd year instead of giving a moderate amount each year. This can allow you to itemize your donations while still meeting your donation goals or obligations.
If your faith requires you to contribute a certain tenth of your income, you can work with your church leaders to make a one-time contribution for tax purposes while still complying with the law. doctrinal.
bottom line
Most donations to a house of worship are tax deductible, but you may not benefit from that tax deduction. If you want a tax break on your contributions, you need to track them and in a year you will list your deductions. Working with your CPA and CFP can help you strategize on how best to raise money for maximum benefit to you and the organization of your choice.
Tax planning tips
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