2023 Tax Rules and Tips for Easier, Cost-Effective Charitable Giving

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It's the 2023 tax filing season. With April 15 fast approaching, individuals and married couples face a pivotal choice concerning their charitable donations. Choose the standard deduction — $13,850 for single people and $27,700 for couples filing jointly — or compile all of 2023's receipts and opt for itemization.

Itemizing can be a lot of work. But you can save money — if your itemized expenses add up to more than the standard deduction and the new tax regulations for 2023 work in your favor.

Tax regulations enacted as part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), which allowed people to deduct 100 percent of their adjusted gross income (AGI) for cash donations in 2020 and 2021, have expired. The new threshold is 60 percent of AGI for cash contributions held for over a year and 30 percent of AGI for non-cash assets.

Another temporary provision of the COVID-19 relief legislation has also run its course. Taxpayers who took the standard deduction used to be able to claim up to $600 in cash donations to qualified charities without having to itemize. They can no longer do so.

Despite these changes, there are still many ways to make charitable gifts work for causes you believe in — and your tax returns. 

Here is some advice that can help you do both:

Bunch your 2023 – 2024 donations

Since the Tax Cuts and Jobs Act was enacted in 2017, the standard deduction has risen annually, with another jump planned by the end of this year. 

For 2023 tax returns, the standard deduction is $13,850 for single filers and $27,700 for married couples filing jointly. There is also an additional standard deduction for those who are 65 and older or blind: $1,850 for individuals and $1,500 per person for each person if married and filing jointly. 

These higher thresholds can make itemizing more arduous, but it's now required for those seeking to deduct their charitable giving. That's where bunching can help.

Bunching entails making two years of annual giving in one, itemizing the year that includes the donations, and taking the standard deduction the year following. 

The benefits of bunching: Bunching can produce a larger combined total deduction over two years than two years of standard deductions. The other benefit, of course, is making a difference.

If you decided to bunch your charitable donations in 2023 or are considering it in 2024, seek an accountant's advice. There are rules regarding income level, filing status and donations that can impact how you file your 2023 tax return and your future charitable giving. 

Donor-advised funds — flexible, easy to manage, convenient

Donor-advised funds (DAF) are another simple, tax-effective way to donate to charity.

A donor-advised fund is like an investment account from which you can make charitable gifts to the organization or organizations you support. Donor-advised funds accept cash, stocks, bonds and other assets, the value of which is in most cases tax deductible.

Donor-advised funds offer flexibility. From a donor-advised fund, you can make yearly grants to nonprofit organizations as long as they are an IRS-qualified 501(c)(3) charity. 

Donor-advised funds are offered by many financial institutions, including Schwab, Fidelity and Vanguard, to name a few. Donor-advised funds are a great way to keep giving — your donations can be made over a period of years — and getting the tax advantages that itemizing can bring. Another benefit: Your donations are invested, so your deposits can grow tax-free.

For more information about how to support UNICEFF USA via a donor-advised fund, please click here. 

For taxpayers 70½ or over: Work that IRA

As of 2023, two choices became available to you.

As in year's past, you could make a donation from your IRA accounts without paying taxes on the funds you direct to charity (qualified charitable distribution, or QCD). Your required minimum distribution that would have been taxed as income can be directed to charity tax-free. So, you can satisfy your required minimum distribution and reduce your annual income level. 

What changed in 2023? A one-time distribution of up to $50,000 from an IRA can fund a charitable gift annuity. Those who opt for this strategy receive a tax-free lifetime payment if used as a charitable donation. In 2024, this once-in-a-lifetime distribution is $53,000.

Just be aware that if you take advantage of either strategy, you will not receive a federal charitable income tax deduction.

To learn how to do an IRA rollover, click here — but always consult your tax advisor to find out if any of these strategies are appropriate for you.

Invest in the happiness of children — including your own

While this may qualify more as life — not tax — advice, involving children in giving back is an effective tool for producing future happiness. According to a  study released by Fidelity Charitable, 45 percent of people who experienced strong giving traditions as children go on to donate $5,000 or more annually to charity — and consider themselves to be very happy adults!

And if your cause is the well-being of children, the race to protect children from war, climate change and the COVID-19 pandemic's devastating fallout makes giving to UNICEF USA more important than ever.

Please help UNICEF continue helping to give the world's most vulnerable children the healthy, happy and safe childhoods they deserve. 

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Learn more about how UNICEF is working to create a more equitable world for every child.