Changes in Tax Benefits for Charitable Contributions for 2022
For the 2020 and 2021 tax years, Congress passed the CARES Act which allowed for tax deductions related to charitable contributions even for taxpayers that were not itemizing. However, the 2022 tax year will not see all the same provisions. With CARES Act provisions expiring, the charitable contributions deduction will be going back to the pre-pandemic guidelines for individuals but will still provide more generous tax breaks for corporations.
For 2021, taxpayers who take the standard deduction were able to deduct up to $300 for single filers and $600 for married filing jointly of contributions to qualifying charities in addition to the standard deduction. However, for 2022, there will be no additional charitable contributions deduction for taxpayers taking the standard deduction. Therefore, a charitable contribution deduction will only be allowed for taxpayers who itemize.
In 2021, taxpayers who itemize were permitted to deduct contributions up to 100% of their adjusted gross income. These taxpayers will only be able to deduct up to 60% of their adjusted gross income for cash contributions for 2022. For non-cash contributions such as shares of stock, the limit will be 30% of adjusted gross income. Any contributions over these limits can be carried forward and deducted over the following five tax years.
For 2021, corporations could make an election to be able to deduct up to 25% of their taxable income rather than the former 10%. For 2022, corporations will still be able to make this election and deduct up to 25% of their taxable income. Contributions that exceed 25% of taxable income may be carried forward for up to 5 years.
What This Means for You
Many taxpayers were able to benefit from the additional charitable contribution deduction of $600 (or $300 for single filers) in 2021. If you typically itemize, then charitable contributions can still provide a tax benefit for you, although the limit as a percentage of gross income is lower than last year.
As always, it is important to keep an accurate record of contributions. Typically, taxpayers receive some form of a receipt or acknowledgement of the gift from the charity.