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 property |
Tangible personal property |
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 contributed |
Although the AGI limitation for cash contributions was increased, it is important to consider
donating appreciated property. Generally, 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. Charitable giving rules can be complex and you should discuss them
with your tax advisor.
Consider donating stock instead of cash
This hypothetical example shows the potential advantages of a charitable donation of stock
that has increased in value during the time the investor owned it (appreciated stock) vs.
cash. It assumes a $10,000 gift; the stock has a $2,000 cost basis and was held for longer
than 12 months; and the investor is in the 37% ordinary-income and 20% long-term
capital-gains tax brackets, subject to the 3.8% Medicare tax on investment income, and able
to itemize deductions.
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 |
By donating cash, the investor saves $3,700 in income taxes. However, by donating appreciated
stock, they also save $1,600 in capital gains taxes and $304 in the Medicare tax on
investment income they would have incurred if they had sold the stock instead of donating
it. This information is hypothetical and is provided for informational purposes only. It is
not intended to represent any specific return, yield, or investment, nor is it indicative of
future results.
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 on deductions
for charitable gifts 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. Important note:
For 2024, check sent by USPS must be postmarked
by December 31. Check sent by FedEx, UPS, or another carrier must arrive by 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, QCDs allow individuals who are at least age 70½ to
distribute up to $105,000 indexed for inflation, per year directly from their
Traditional or Traditional Inherited IRA to a qualified charity with no federal income
tax consequences. See details discussed earlier in the IRA section.
- 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 donor-advised
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.
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 2024, you can make your 2024
contributions in January 2025. Making your 2025 contributions later during the year might
give you enough to itemize in one calendar year. You could then take the standard deduction
in 2024 and again in 2026, 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.
A Donor Advised Fund (DAF) is a charitable giving vehicle which may assist with “bunching” of
charitable contributions into a given year. This can be useful when you are able to make a
donation but have yet to determine the timing of the distributions out of the donor-advised fund
or what charities will receive the gift.
Social Security
Social Security and Medicare taxes
In 2024, individuals will be taxed 6.2% in Social Security taxes, up to $168,600 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: $3,822
This benefit is for an individual who reaches full retirement age in 2024 and earns at least the maximum wage base for 35 years.
Information provided by the Social Security Administration.
Taxation thresholds
Up to a certain percentage of an individual’s Social Security benefits may be subject to taxation when his or her provisional income11 exceeds certain threshold amounts:
11. Provisional income generally includes MAGI plus nontaxable interest and one-half of Social Security benefits.
12. 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.