Charitable Contributions

‘Tis the season for giving, and one way to give and reduce your 2023 income tax liability is by making charitable contributions. Generally, you can claim an income tax deduction of up to 60 percent of your adjusted gross income for cash contributions to a public charity.

You might also be able to claim an income tax deduction of up to 30 percent of your adjusted gross income for non-cash contributions to a public charity. Contributing appreciated property you have owned for more than one year to a charitable organization provides an extra tax benefit as you receive an income tax deduction for some or all of the value of the property contributed and do not pay tax on the gain inherent in the property contributed.

If you are aged 70 ½ or older, you can donate up to $100,000 in 2023 to one or more charities directly from a traditional IRA. This donation, known as a “qualified charitable distribution,” does not qualify for an income tax deduction, but you won’t be subject to income tax on the IRA distribution. A qualified charitable distribution is a great way to take a required minimum distribution (RMD) from your IRA if you don’t need the funds.

Another way to make charitable contributions is to make an irrevocable donation of cash or other assets to a donor-advised fund (DAF). Under a DAF, you can take a tax deduction of up to 50 percent of adjusted gross income for the donation into a “charitable” investment account, which gives you the opportunity to direct donations from the fund to IRS qualified public charities. Donating to a DAF also allows you to shield highly appreciated assets from capital gains taxation.