Usually NO tax deduction for charitable donations

Mar 13, 2015

—

You’ve made a charitable donation to a qualified organization and they gave you a receipt for your donation. Great job, you deserve to feel good about your action! Now, do you get a tax deduction for your good deed?

In most cases the answer is “NO”. Here is why:

1. IRS says that only about one in three tax filers itemize deductions. Two out of three tax filers take a standard deduction, That means that most people do not get to list specific charitable donations as deductible expenses. In other words, for most people, your taxes are the same with or without you charitable donation.

2. Higher income tax filers are affected by a phase out of itemized deductions and may not benefit from charitable contributions.

3. There are limits to the overall amount that a tax filer can deduct as a charitable contribution. People with low taxable income who have other not-taxed support (like students, newly self-employed people or elderly tax filers, for example) can be affected more often that we might guess.

I recognize that is a widely misunderstood tax issue, that’s why I wrote the blog post. The IRS discusses this topic in Publication 526 titled “Charitable Contributions”.

Comments

3 responses to “Usually NO tax deduction for charitable donations”

John durso

March 13, 2015

Tony, to make a blanket statement like “no tax deduction” is very irresponsible of you and hamful to the non profit community. The nonprofits that i am familialar with do not mention tax deductions as a selling point. Secondly, personally, i DO get some type of deduction each year for my donations, so perhaps you should save your advice for your clients.
Tony Novak, CPA, MBA, MT

March 13, 2015

John: According to IRS you are in the minority of tax filers. That was my point; I am trying to address the “average” person in the most typical situation who may hold a false belief. This mass market financial advice has been the focus of my writing career rather than private clients who, as you suggest, may be more likely to benefit. I don’t think that clarifying this point is harmful to non-profits since most, as you said, do not rely on the deductibility of contributions. I certainly don’t see how my post could be viewed as a “blanket statement” when I clearly pointed out the proportions of tax filers affected by the different tax positions.

I was unfortunately involved in two conflicts this week where a donor claimed that that the soliciting non-profit claimed that the donation was tax deductible and the tax preparer determined that it was not. I’m not suggesting that ant large number of non-profits do this, but clearly it does sometimes happen.

Some minority of tax filers do get a deduction but the large majority of tax filers do not. I am trying to point out that difference between perception and reality. See “Reforming the Charitable Contribution Substantiation Rules”, January 2013 published by Urban Institute for more detailed discussion. http://www.urban.org/UploadedPDF/412737-Reforming-the-Charitable-Contribution-Substantiation-Rules.pdf
Tony Novak Certified Public Accountant | Tax aspects of charity through crowdfunding

August 2, 2016

[…] through crowdfunding is not tax deductible. At first, it would seem to be a major deterrent. But a blog post I put out last year explains that most people get no tax benefit from a donation to a charitable organization anyway, […]

Usually NO tax deduction for charitable donations

Comments

3 responses to “Usually NO tax deduction for charitable donations”

Leave a Reply