topic Charitable Donation Deduction Limit in Deductions & credits

Charitable Donation Deduction Limit

edgelser2 — Mon, 25 Jan 2021 17:26:04 GMT

I have a "simple" scenario I would like an answer for, related to the deductability of several "flavors" of charitable donations to a "50% limit organization". Basically, I want to maximize my contribution of a significantly appreciated mutual fund, and then maximize my full itemizable charitable donation amount. EXAMPLE: With an AGI of $60,000, I believe the maximum value of the appreciated mutual fund that I can contribute and deduct is 30% of AGI or $18,000. Next, I believe I can make a further maximum donation of $12,000 of a combination of cash and household goods (Goodwill stuff, clothing, furniture, etc). Lets say roughly $7000 cash and $5000 household items. The total combined charitable donation amount not to exceed $30,000 or 50% of the AGI of $60,000. Is the above scenario correct/legit??

I do NOT wish to take into account the tax rules for 2020 related to increased limits in the CARES act, but only a "normal" tax year....

Re: Charitable Donation Deduction Limit

Cynthiad66 — Wed, 27 Jan 2021 00:44:54 GMT

Under the law known as the Tax Cuts and Jobs Act, P.L. 115-97, the rule that limits the charitable deduction to 50% of the donor's charitable contribution base increased to 60% for tax years beginning after Dec. 31, 2017, and before Jan. 1, 2026 (for cash contributions to public charities and private operating foundations).

For your consideration, For 2020 only, this limit has been raised to 100% under Section 2205 of the CARES Act for qualified contributions (cash donations to a public charity that is not a donor-advised fund or a supporting organization that the taxpayer elects to treat as qualified contributions).

So yes the exam you created in your question is correct, however the base increased to 60% if you would like to take advantage of the additional 10%.

Re: Charitable Donation Deduction Limit

edgelser2 — Wed, 27 Jan 2021 12:08:00 GMT

Just want to double check your last statement about "the base increased to 60%". That may be true for cash contributions only, but I thought that since I was combining cash contributions (of well less that 60% AGI) and appreciated non-cash contributions and household goods that the limit of combined itemizable contributions would be 50% of AGI. Is that correct?

Re: Charitable Donation Deduction Limit

KrisD15 — Wed, 27 Jan 2021 16:31:37 GMT

The amount of non-cash would count up to the 50% limit.

Next, the cash contributions would be considered to increase the deduction to the 60% limit.

IRS Pub 526

Re: Charitable Donation Deduction Limit

edgelser2 — Thu, 28 Jan 2021 14:22:59 GMT

I should have thought of this before! I used TurboTax Deluxe 2019 to run several sample scenarios. My AGI on form 1040 (line 8b) is exactly $60,000. I then entered various values in the Step-by-Step Interview for Charitable Donations of Money, Stock and Items-to-Goodwill, and then checked Forms View to see the results in Schedule A - "Gifts to Charity" (lines 11-14).

Bottom line: Cash ONLY Contributions could be as high as 60% of AGI or $36,000 (ScheduleA line 14). BUT, as in my example above, if I first enter the "max" of appreciated mutual funds (30% of AGI) or $18,000, and then Household items of $5,000, any cash contributed above $7,000 (or a total of 50% of AGI: $30,000) was ignored. Form Schedule A line 14 would be designated "LIMITED" and only allow up to a max of $30,000 on line 14.

Am I missing something??