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VIEWpoint Issue 1 | 2023
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If you plan on claiming a charitable contribution on your 2021 tax return, be prepared to also have substantiated documents related to your donation ready should it trigger an Internal Revenue Service (IRS) audit. With the Consolidated Appropriations Act, 2021 extending the temporarily suspended limits on charitable contributions through 2021, the IRS has increased its efforts to crack down on taxpayers abusing this tax benefit and is heavily watching outsized contributions being recorded on tax returns this filing season.
Taxpayers taking advantage of the charitable contribution deduction on their 2021 tax return should be aware of the following substantiation requirements outlined by the IRS:
Under the 2021 charitable giving rules, taxpayers may elect to deduct any cash contribution made to a qualified organization in 2021 – up to 100% of their adjusted gross income (AGI). The 100% limit does not apply to donations made to a supporting organization or a donor–advised fund. This means a taxpayer could donate their entire salary in 2021 to a qualified organization and owe no taxes on that income. Plus, charitable organizations can benefit from larger donations at a time when they need them.
The following provisions may impact your 2021 charitable contribution deduction:
Taxpayers may experience deduction limitations based on the type of organization they support. For example, contributions are limited to 30% of their AGI when made to certain private foundations, fraternal societies, veterans’ organizations, or cemetery organizations. You can check the deductibility status of various organizations here.
Our tax advisors work closely with individuals and businesses to ensure they take advantage of tax credits and deductions available to them while also minimizing their potential tax liability. To obtain assistance with gathering your documents and filing your 2021 returns, contact Doeren Mayhew’s dedicated Tax Group today.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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