The itemized deduction for charitable contributions is allowed based on a percentage of the taxpayer’s AGI, adjusted for Net Operating Losses, referred to as the “contribution base.” The Tax Cuts and Jobs Act changes this percentage.

Prior Law

Through December 31, 2017

The applicable percentages are 50%, 30%, or 20% depending on the type of organization to which the contribution was made. The most common 50% limit organizations include, but are not limited to, churches, educational organizations, hospitals and medical research organizations, governmental bodies, agricultural research organizations, publicly supported organizations, and certain private foundations. Charities that are not 50% charities are 30% charities.

New Law

Effective for tax years beginning after December 31, 2017, and before January 1, 2026

The contribution-base percentage of cash contributions made by individuals to 50% charities increases to 60%.

Commentary

The Tax Cuts and Jobs Act does not change the five-year contribution carry over for charitable contributions made in excess of the applicable percentages. Also, due to the increased standard deduction starting in 2018, it is likely that fewer individuals will itemize deductions, which includes charitable deductions.

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Curt Bach
I joined Hawkins Ash CPAs in August 2010, and am currently a manager in the firm’s Medford office. I provide a variety of tax services, including trust and estate tax preparation and planning. I have more than nine years of experience providing audit and tax services to nonprofit organizations, governmental entities and small businesses. I am a member of our firm’s tax committee and not-for-profit service group.

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