1 Way to Make the Most of Charitable Giving Write-Offs

If you're making some year-end tax moves or starting to look ahead at tax planning for 2024, charitable giving write-offs should be part of your process. If you have enough income or assets to be able to give generously to charity, and you can itemize your deductions, you can get some worthwhile tax benefits while supporting good causes.

Let's look at one simple way to maximize your charitable giving write-offs.

Charitable giving write-offs only happen if they're itemized

Most people might not realize this -- you don't get charitable giving write-offs at tax time unless you have itemized deductions. Most people take the standard deduction, which for the 2023 tax year is $13,850 for single filers, and $27,700 for married couples filing jointly. If you don't itemize, your charitable donations are irrelevant to your taxes.

Here are the types of deductions that can be itemized:

• State and local income taxes ("SALT") and real estate taxes (the property taxes that homeowners pay to local governments) -- you can only deduct up to $10,000 of these payments per household. This rule is called the SALT deduction cap, and it makes it harder for many taxpayers to itemize.
• Sales taxes for local or state governments, which could include sales tax for a major purchase like a new vehicle or other big-ticket items.
• Personal property taxes
• Mortgage interest (including home mortgage interest or tax-deductible home equity loan interest)
• Disaster losses (in case you've suffered a fire or natural disaster)
• Some dental and medical expenses (but only if they exceed 7.5% of your adjusted gross income, or AGI)
• Gifts to charities

As a taxpayer, you should always take the biggest deduction amount that you're allowed -- whether it's the standard deduction or itemized deduction. You have the right to reduce your taxable income by as much as IRS rules allow. So if you want a tax break for your charitable contributions, your total itemized deductions need to be larger than your standard deduction amount. If you want charitable giving write-offs, you should try to itemize.

One simple tax strategy for charitable giving write-offs

Sometimes, taxpayers will have almost enough itemized deductions to be bigger than the standard deduction. If you're close to exceeding the standard deduction, you should try to give enough extra money to charity to put you over the top. Boosting your charitable giving can be a simple tax strategy that reduces your taxable income.

Let's look at two example taxpayers to see how this works.

Example No. 1: Dan, Texas single guy

Dan is a single person who owns a home and lives in Texas, where there are no state income taxes. Dan's itemizable deductions are his local property taxes of $5,400 per year, mortgage interest of $6,000 per year, and a monthly donation of $100 ($1,200 per year) to his church -- for a total of $12,600 of itemized deductions.

However, as a single person, Dan's standard deduction in 2023 is $13,850. So if Dan wants a tax break for those charitable donations, if he has some extra cash in savings he should write one more check to charity -- for $1,251 or more -- by the end of 2023. If Dan increases his charitable contributions to $2,451, he can itemize. And that makes those charitable donations tax deductible.

Here's how Dan's list of itemized deductions looks now, after writing that big year-end check to charity (and exceeding the standard deduction by $1):

Example No. 2: Maria and Joe, New York married couple with a new baby

Maria and Joe are a married couple (filing jointly) who live in New York City where they own a condo. New York is a higher-tax state for state income and property taxes, so Maria and Joe are paying the full $10,000 amount of the SALT deduction cap. They also pay $6,000 per year in mortgage interest, and have just welcomed a new baby. The costs of healthcare during Maria's pregnancy and childbirth caused Maria and Joe to have some extra out-of-pocket medical expenses, exceeding 7.5% of their AGI by $8,000.

Without any charitable contributions, Maria and Joe's itemized deductions add up to $24,000. This is less than their standard deduction amount of $27,700. But they're pretty close to being able to itemize! If Maria and Joe can write a check (or make an online donation via credit card) by the end of the year for $3,701 or more, that charitable contribution would be tax deductible.

Here's how Maria and Joe's list of itemized deductions look now, after that big year-end charitable donation (and exceeding the standard deduction by $1):

Bottom line: Depending on your tax filing status and overall financial situation, a well-timed donation can help you get charitable giving write-offs. During the tax year, pay attention to how much your itemizable deductions are adding up to -- and consider giving more money to charity by the end of the year so you can itemize.