May 2025 Newsletter (Copy)
If you’re a charitable business owner or individual aiming to make a meaningful impact this year, now is the perfect time to act. With the May 15th nonprofit tax filing deadline fast approaching, understanding how your charitable contributions fit into your overall tax strategy is critical for enhancing your tax benefits and making a greater difference in the communities you care about.
It is important to note that the tax rules have changed, and these changes may impact your charitable contributions. Understanding how these updates affect your giving will enable you to focus on the most effective strategies. After all, you want to ensure that your good intentions translate into meaningful benefits for you and the causes you care about. Some taxpayers may believe getting a 100% tax deduction for their charitable donations is automatic. However, the Tax Cuts and Jobs Act (TCJA) makes it harder to benefit from your donations.
You donate $10,000 to a church, school, or other 501(c)(3) charity. Will you benefit from the tax deduction?
It depends!
Whether the payment comes from your personal or business bank account, charitable deductions are reported as itemized deductions on your tax return. This means taxpayers who opt for the standard deduction do not receive a tax break for their charitable contributions. On your return, the following limits apply:
60% Adjusted Gross Income limit for cash donations
30% Adjusted Gross Income limit for non-cash donations
You must claim the itemized deduction.
Pro tip: Each year, check how much of your charitable contributions will be tax-deductible based on the limitations above and work with tax advisors to implement these tax savings options:
Here are a few ways you can maximize your tax deduction while making an impact:
Group Your Charitable Contributions ("Bunching")
Increase your impact in specific years by combining multiple years’ worth of contributions into one tax year. For example, save your 2024 donation and combine it with 2025’s contribution to exceed the itemized deduction threshold.
Contribute to a Donor-Advised Fund (DAF)
A DAF allows you to make a significant charitable contribution in one year, receive an immediate tax deduction, and distribute donations to charities over time. It’s an excellent tool for maximizing impact while maintaining flexibility.
Leverage State Tax Credits
Some states offer programs where donations to qualified initiatives can provide both federal deductions and state tax credits, a powerful way to stretch your giving even further.
Integrate Giving With Estate Planning
Vehicles like Charitable Remainder Trusts, Charitable Lead Trusts, or Charitable LLCs can help you reduce income and estate taxes while creating a lasting legacy for your family and favorite causes.
Use Your Business for Charitable Contributions
When donations are directly related to your business and you expect a reasonable return, they can qualify as business expenses, potentially reducing self-employment income and avoiding itemized deduction limits. Examples include sponsoring charitable events, donating a portion of sales proceeds, or offering promotional incentives tied to donations.
