24 Jan I give $30K to charities. What happens with my tax return?

Q. We give to about 35 to 40 organizations during the year. How has the tax law changed? Can we still itemize? We historically give about $25,000 to $30,000 to the charities, including our churches, each year.
—Givers

A. You’re very generous.

The 2017 Tax Cuts and Jobs Act made some significant changes to how you file your taxes.

Because the standard deduction was raised, fewer people itemize.

For 2021, the standard deduction is $12,550 for singles and those married filing separately, $25,100 for those married filing jointly and $18,800 for heads of household, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.

He said charitable contributions are deducted on Schedule A “itemized deductions.” The deductions you can list are medical expenses that exceed 7.5% of your income, state and local taxes, mortgage interest and charitable contributions, he said.

Prior to tax law change, the deduction for state and local tax (SALT) was unlimited. But now, the SALT deduction was limited to $10,000.

“Because of this, many taxpayers no longer itemize their deductions, especially taxpayers with no or low mortgages,” Kiely said. “These taxpayers take the standard deduction.”

If you take the standard deduction, you may take a separate deduction for charitable contributions of up to $300, or $600 if you are filing jointly, he said.

You said your question that historically “we” give about $25,000 to $30,000 to charities, so we’re going to assume you’re married and file jointly.

Given this, you may want to consider a strategy called “lumping your contributions.”

“With this strategy, you may want to contribute $5,000 to $10,000 in one year and take the standard deduction. In the next year, you contribute $35,000 to $50,000 and benefit from a higher itemized deduction,” Kiely said. “Over the two-year period, you are contributing the same amount of money but in a more tax efficient fashion.”

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This story was originally published on Jan. 24, 2022.

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