Tax Insights

Your Guide to State, Local, Federal, Estate + International Taxation

Can you carry over your charitable contributions?

charitable contributions, taxDo you make charitable contributions because you get a tax deduction, or do you make them because you believe in the mission of the nonprofit organization? Or is the real answer somewhere in-between those two?

Regardless of your answer, there may a time when your charitable contributions made in a tax year exceed the amount that you can deduct on Schedule A of your Form 1040 for the year. The deduction for most charitable contributions is limited to 60% of your adjusted gross income (AGI). Note: there are some other percentages that can come into play if the item given away is capital gain property or the contribution is not made to a public charity – we are not covering that here.

So, what happens if your income for a year suddenly drops and you have already given away more than 60%? Do you lose the benefit of the tax deduction?

And the answer to that is a resounding, but qualified, no! The contributions can be carried over for five years. However, and this is a big however, the carryover contributions cannot be considered until any contributions from the current year have been considered.

Let me explain this with some numbers (I am an accountant – I like numbers). Pretend you have contributions that you could not use in 2018 and are carrying them over in the amount of $24,000. You also just contributed in 2019 to your favorite charity in the amount of $24,000. That is $48,000 total available that you may be able to deduct on your 2019 Schedule A, subject to the 60% AGI limitation.

If your 2019 AGI is $40,000, then the allowable amount of charitable contributions would be $24,000 (60% of your 2019 $40,000 AGI). But not the $24,000 from 2018 – the $24,000 from 2019. That leaves just four more years on your 2018 charitable carryover before you lose it.

Alternatively, pretend your 2019 AGI is $60,000 – the allowable amount of your charitable contribution would be $36,000 (60% of the $60,000 AGI), which would consist of the $24,000 from 2019 and $12,000 of your carryover from 2018, leaving you with a $12,000 charitable carryover to 2020 from 2018 and none from 2019.

Don’t Miss: How the recent CARES act alters charitable contribution tax deductions

I know – this is all as clear as mud. But if your reasons for making charitable contributions lean more towards the deductibility on your income tax return than altruistic reasons, then keep one eye on your AGI when you are writing a check to your favorite charity.

For additional information on how to take advantage of tax deductions of any kind, feel free to contact a Henry+Horne tax professional who is eager to assist you.

Donna H. Laubscher, CPA

Comments

  1. Julio P. says:

    Hi. You gave an example of a carryover if one has exceeded their charitable contribution limit. But what if my family and I claimed the standard deduction and were not able to claim years worth of donations? Can we count up to 5 years of donations and contributions now since we are not filing with the standard deductible this year? Thanks.

    • admin says:

      Julio,

      No, unfortunately. The carryover only works if it has already been reported on a filed return with the Internal Revenue Service. You cannot claim a carryover for years in which you took the standard deduction.

      Donna H. Laubscher, CPA

    • Carol says:

      That is not correct. You CAN carry over contributions that you did not deduct in a prior year (because you took the standard), however, you will have to reduce the amount of carryover by the amount that WOULD have been deducted had you itemized. You must consider and reduce carryover by the amount that WOULD have been deducted for each year you took the standard deduction for the subsequent five years.

      All of your current year contribution must be used first, subject to 50% of AGI limitation.

      Then, if you have carryovers from two or more prior years, use the carryover from the earlier year first.

    • admin says:

      Yes, it is correct that you can deduct carryovers from prior years, after reducing from the carryover that amount that you would have deducted if you had itemized. So it is mathematically possible to have a carryover if you took the standard deduction, but the record keeping may be somewhat onerous. As mentioned in the blog, you must use your current year contributions first, before any carryover amounts can be considered.

      Donna H. Laubscher, CPA

    • mandy says:

      Carol is correct. We did this in 2012. We used the standard deduction in 2011. But in 2012 we were able to itemize again. We did carry over as Carol stated. BUT… We were audited this year for that 2012 tax return. We mailed in all of our charitable donation statements for 2011 & 2012 & a copy of the 2011 & 2012 tax forms. It took the IRS 7 months to send us a letter stating our original return would stand and we were good to go. If you don’t mind the audit (which will probably occur) it was worth it.

    • Amanda says:

      How did you find out the right number to itemize in 2012? How did you know what number to put in as carry over? Was it the entire donation amount made in 2011?

    • admin says:

      Amanda –

      Thank you for your interest in our blog. Our tax software computes this for us, and we check the amounts from there. So, as in all things tax, the answer is it depends – it depends on what else is in your tax return. If you are interested in retaining our services for assistance, please call our office.

      Donna H. Laubscher, CPA

    • Rebecca says:

      I itemized last year and have a small carryover (200$). I don’t have enough to itemize this year, however my state taxes will accept all charitable donations. So, can I save the 200$ carryover for next tax year when I suspect I will itemize? Or do I use it for my state taxes this year? Or does it just dissolve if I don’t itemize the following year?

    • admin says:

      Rebecca –

      Thank you for your question. Unfortunately, you don’t mention which state, and all states vary. Even if you do provide the state, it may be too specific of a question for a response here. If you are interested in retaining our services to look into this, please contact us.

      Donna H. Laubscher, CPA