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With the passage of the Tax Cuts and Jobs Act in 2017, fewer people are able to take a tax deduction for their charitable donations due to the increase in the standard deduction:    in 2020 the standard deduction is $12,400 for single filers, $24,800 for married filers filing jointly, and $18,650 for head of households. This is almost double what was allowed prior to the passage of the TCJA.  Combined with the $10,000 cap on the deduction for state and local taxes, fewer taxpayers have enough deductions to itemize. Below are some tips and tricks on how to get that tax deduction while helping your favorite charities.

• If you’re over 72 and are required to take required minimum distributions from a traditional IRA (other than a SEP or SIMPLE IRA), you can make a qualified charitable distribution directly from your IRA to a qualified charitable organization.  A qualified charitable distribution is excluded from taxable income and this bypasses the issue of not itemizing deductions.  There is an annual maximum on qualified charitable contributions of $100,000, with any excess distribution being treated as ordinary income.  It is important for the taxpayer to receive acknowledgement of their contribution from the organization, just as they would a normal contribution.
• A taxpayer can “bunch” their charitable contributions.  Bunching involves making several years of charitable contributions in one year and works best if a taxpayer is close to itemizing but can’t quite get over the threshold.  The example below best illustrates this option:

Taxpayer A is a single filer that usually makes $1,000 of charitable contributions in a year.  They have home mortgage interest of $4,000 and property taxes of $2,000, with state taxes paid of $5,000.  If they make $1,000 worth of contributions in a year, they come up short of itemizing, as their deductions add up to $12,000.  However, if the taxpayer were to contribute three years of donations in one year, they would be able to itemize in one of the years and get a benefit for the contributions, while still getting the standard deduction in the other two years.  Over the three years, this results in larger total deductions to the taxpayer and allows the to get a tax benefit for their charitable contributions.

These are a couple of examples of how, with a little bit of planning, you still may be able to get a tax benefit for your charitable contributions.  Reach out to a tax professional at Murry & Associates, LLC to see if these, or other options can apply to you.

The 2017 Tax Cuts and Jobs Act (TCJA) changed business deductions related to meals and entertainment expenditures. Our office has received several questions over the past year regarding what expenditures are still deductible under the new law.

Prior to TCJA, businesses were generally able to deduct 50 percent of the cost of meals and entertainment expenditures that were directly related to the taxpayer’s business. Under the new law, these business expenditures are subject to the following limitations:

• Entertainment expenses and membership dues to social or recreational clubs are generally no longer deductible, unless they are primarily for the benefit of employees (such as a holiday party or summer picnic).

• Business meals are generally 50 percent deductible, so long as an employee is present, and the expense is not considered lavish or extravagant.
  • Prior to TCJA, a 100 percent deduction was allowed for food and beverage furnished to employees on the business premises - these are now subject to the 50 percent limit.
  • Food or beverage made available to the public for free is fully deductible.

We recommend that you update your chart of accounts to separately track each category of expense. You should also keep adequate receipts and records to prove your expenses. These records should show the date, amount of the expense, location, and number of people present.