30 Nov More on deducting charitable gifts

Q. I have questions about your earlier story on direct transfers from 401(k)s to charities. For those who itemize deductions, does this strategy have any real effect? What if I am subject to the Alternative Minimum Tax? When there is an net benefit to the direct transfer, can the money be split among several charities? What happens to New Jersey taxes, which do not have deductions of gifts to charity?
— Curious

A. Lots of questions!

We went back to Jody D’Agostini, a certified financial planner with AXA Advisors/The Falcon Financial Group in Morristown, for your answers.

She said you can only take a charitable deduction only if itemize deductions.

“If the total of your allowable deductions exceeds the standard deduction, then taking the itemized deduction makes sense,” she said. “Schedule A will show you the complete list of allowable deductions.”

If you take the standard deduction, then you aren’t able to take charitable deductions, she said.

And even if you’re subject to the Alternative Minimum Tax (AMT), your charitable donations are still tax deductible. These, at least, will reduce your AMT liability.

If you want to donate to several charities, you can make contributions to each, but they must come directly from your IRA to each.

And finally, New Jersey.

“New Jersey does not allow deductions of gifts made to charity and therefore you cannot deduct them from state income taxes,” D’Agostini said. “There are several lawmakers who are proposing legislation to allow for this, but its future is uncertain at this point, due to the budgetary challenges that the state currently has.”

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This post was first published in November 2016.