Congress recognized that the doubling of the standard deduction under the Tax Cuts and Jobs Act of 2017 would effectively eliminate the ability of many taxpayers to obtain a benefit for their charitable contributions, potentially causing many taxpayers to give less. To counteract this, a change was made to increase the adjusted gross income (AGI) limitation for cash contributions to a public charity from 50% to 60%.
When deciding to make a direct gift of stock or cash, remember that your deduction may be limited by your income as shown in the following chart. The limitation is based on the type of organization and the type of gift.
AGI limitations on deductions for charitable gifts
Type of organization |
Cash gifts |
Long-term capital gain property1 |
Tangible personal property2 |
Public charity |
60% |
30% using fair market value of the asset contributed |
30% using fair market value of the asset contributed |
Private foundation |
30% |
20% using fair market value if the asset contributed is publicly traded stock |
20% using tax/cost basis of the asset contributed3 |
Although the AGI limitation for cash contributions was
increased, it is important to consider donating appreciated
property. If you donate appreciated property that has been
held for over one year, you are eligible to deduct the fair
market value without paying income tax on the unrealized
gain. However, you can only deduct up to 30% of your AGI
when making these gifts of long-term capital gains property
(to a public charity). Being able to avoid the payment of
taxes on the unrealized gain combined with the charitable
contribution deduction may produce a better tax result than
donating cash. A common example would be donating stock
held long term that has increased in value since its purchase.
Donating the stock will allow for a deduction of the full fair
market value without paying tax on capital gains. Contrast
this with the alternative of selling the stock, paying capital
gains tax, and then donating the net amount.
Gift |
Income Tax Savings† |
Capital Gain Tax Savings |
Medicare Tax on Investment Income Savings† |
$10,000 Cash |
$10,000 x 37%= $3,700 |
n/a |
n/a |
$10,000 Stock |
$10,000 x 37%= $3,700 |
$8,000 x 20%= $1,600 |
$8,000 x 3.8%= $304 |
When considering charitable gifting and capturing potential
tax deductions, review your tax situation and carefully
determine which assets to give. Gifts made to qualified,
tax-exempt organizations are generally deductible, but
as noted in the AGI limitations table above, are subject to
limitations based on the type of organization (public or
private), the asset being gifted, and your AGI. Charitable
contributions that are not deductible in the current year
due to AGI limitations can be carried forward for up to
five years.
- Gifts made via check or credit cards are considered deductible in the current year if the check is written and mailed or the charge to the credit card posts on or before December 31.
- Gifts of stock are considered complete on the date the brokerage firm transfers title, which can take several business days (or the date the taxpayer can substantiate permanent relinquishment of dominion and control over the stock), so be sure to plan these types of transfers well before December 31.
- Obtain and keep receipts and be aware of any value received for goods or services that may reduce the value of any tax deduction.
Naming a qualified charity as the beneficiary of your
401(k) or Traditional IRA upon your death can keep your
estate and your heirs from having to pay income taxes on
the distributions from those retirement assets. The full
amount of your retirement assets will benefit the named
charity because charities do not pay income taxes. The
retirement assets will remain as part of your estate, but your
estate will receive a charitable tax deduction. Alternatively,
you can divide your retirement assets between your loved
ones and charity, naming both as beneficiaries.
Depending on your circumstances, there are some additional planning options to consider:
- As noted earlier in this guide, qualified charitable distributions (QCDs) allow individuals who are at least age 70½ to distribute up to $100,000 per year directly from their IRA to a 501(c)(3) nonprofit with no federal income tax consequences.
- If you are approaching retirement and anticipate lower ordinary income during retirement, you may find it beneficial to explore making a large gift to a donoradvised fund while working instead of smaller gifts during retirement.
- A charitable remainder trust (CRT) is a strategy in which annual income is distributed to one or more noncharitable beneficiaries, either for a life term or a term of not more than 20 years. This is an option to use in light of the SECURE Act because non-spouse beneficiaries must withdraw assets within 10 years; using a CRT may result in income distributions occurring over a 20-year period. At the end of the term, the remaining assets are paid to your chosen charity.
Take advantage of charitable deductions
The higher standard deduction combined with limits on other deductions means
fewer people will be able to deduct their charitable contributions. An option to
get a deduction is to bunch your donations together into one year and take the
standard deduction in an alternate year if eligible.
For example, instead of making contributions in December 2022, you can make
your 2022 contributions in January 2023. Making your 2023 contributions later
during the year might give you enough to itemize in one calendar year. You could
then take the standard deduction in 2022 and again in 2024, when you don’t
make contributions. If you are looking to maximize your charitable contributions,
your tax advisor can assist with determining whether AGI limitations will apply
and the timing of the gifts to fully utilize your deduction.
Social Security
Social Security and Medicare taxes
In 2022, individuals will be taxed 6.2% in Social Security taxes, up to $147,000 of earnings, at which point there are no additional taxes. Medicare taxes are applied to 1.45% of earnings and there is no maximum wage cap. An extra 0.9% may be applied on the earnings over $200,000 for single filers and for joint filers earning over $250,000. Contact your tax advisor for current Social Security and Medicare tax information.
Earnings test
The earnings test indicates the level of earnings permissible for Social Security recipients without incurring a deduction from benefits. These limits are indexed to increases in national earnings.
Maximum monthly benefit: $3,345
This benefit is for an individual who reaches full retirement age in 2022 and earns at least the maximum wage base for 35 years.
Information provided by the Social Security Administration.
Taxation thresholds
A certain percentage of an individual’s Social Security benefits may be subject to taxation when his or her provisional income¹ exceeds certain threshold amounts:
1. Provisional income generally includes MAGI plus nontaxable interest and one-half of Social Security benefits.
2. There is an exception to this rule if you lived apart from your spouse for the entire year. Consult your tax advisor for more information.