In a recent edition of the Ask the Editor series, Joy Taylor, Editor of The Kiplinger Tax Letter, addressed various questions regarding the tax implications of charitable contributions. With tax season approaching, understanding the rules surrounding charitable deductions is vital for taxpayers looking to maximize their benefits.
Documenting Charitable Contributions
One reader inquired about the necessary documentation to support a cash donation made earlier in the year. Taylor explained that the requirements vary based on the type of donation. For cash contributions, it is essential to retain records such as cancelled checks, electronic fund transfer receipts, or credit card statements.
For cash donations exceeding $250, a contemporaneous written acknowledgment from the charity is required. When it comes to property donations, a receipt from the charity suffices for contributions under $250. For donations of $250 or more, a written acknowledgment is also necessary, and if the donation exceeds $500, taxpayers must attach Form 8283 to their tax returns. Donations valued over $5,000 require a written appraisal, as detailed in IRS Publication 526.
Audit Concerns and Future Changes
Another question raised was whether making a substantial donation would increase the likelihood of an IRS audit. Taylor clarified that while claiming large deductions does not automatically trigger an audit, significant write-offs compared to reported income can raise suspicions. Thus, maintaining accurate records and following substantiation rules is crucial.
Looking ahead, readers expressed curiosity about the upcoming changes under the “One Big Beautiful Bill” (OBBB). Taylor noted that starting in 2026, non-itemizers will be allowed to deduct up to $1,000 of charitable contributions, and $2,000 for joint filers. Conversely, for itemizers, the charitable deduction will only apply to gifts exceeding 0.5% of adjusted gross income (AGI). For instance, if an individual’s AGI is $232,000 and they donate $14,000, only $12,840 can be deducted after applying the new threshold.
Lastly, a reader questioned the tax implications of donating Series I savings bonds before they matured. Taylor explained that such a donation would not allow the donor to avoid federal income tax on the interest earned. Instead, it would accelerate the reporting of previously deferred interest, leading to a potential tax liability in the year of donation.
These insights from Joy Taylor provide valuable guidance for individuals considering charitable contributions this tax season. As tax regulations continue to evolve, staying informed is essential for making the most of charitable gifts. For further information, taxpayers can refer to IRS Publication 526 or consult a tax advisor for personalized advice.
