30 Dec Can I take a tax deduction for giving to charity?

Q. I used to contribute cash and also clothing to charity but I understand the tax rules for deductions have changed. What’s different now?

— Donor

A. How charitable contributions count on your tax return is very different since the new tax plan was passed.

Under the Tax Cuts and Jobs Act (TJCA), both standard and itemized deductions were greatly impacted, said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.

“The only specific impact of the new law with regard to charitable contributions was the increase of the limit from 50% of adjusted gross income to 60% of adjusted gross income,” Karu said. “While both types of charitable contributions are still allowable under the law, you may not be able to deduct due to other changes.”

Karu offered two examples.

Say you have two married taxpayers who are both under age 65 and live in an apartment or no longer have a mortgage. Their standard deduction would have been $24,000 for 2018.

“Without mortgage interest and assuming they paid $10,000 or more in state income taxes, they would have needed over $14,000 in charitable contributions in order to itemize their deductions,” Karu said.

Then imagine the same couple, but with mortgage interest of $7,000. They pay both real estate tax and state income tax in excess of the statutory limit of $10,000. That gives them $17,000.

“As long as their charitable contributions exceed $7,000 — the difference between $24,000 and $17,000 — the taxpayers would be able to itemize their deductions,” Karu said.

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This story was originally published on Dec. 30, 2019.

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