If you tithe to your church or give to charity and were expecting the same tax benefits you’ve gotten used to, you may have been surprised to see your tax return this year. As of March 17, the IRS reports the average refund amount dropped 11 percent from last year.
Why?
It turns out, the IRS changed the rules for this year’s tax season when it came to charitable deductions.
During the pandemic, the Consolidated Appropriations Act was signed into law on December 27, 2020 as a stimulus measure to provide relief to those affected by the pandemic. This meant for tax year 2020, taxpayers who took the standard deduction were able to deduct up to $300 of qualified cash contributions without itemizing their deductions. In 2021, this amount doubled to $600 for taxpayers filing married filing jointly. However, that tax exemption was not applied for tax year 2022, meaning taxpayers who didn’t itemize and take the standard deduction wouldn’t be able to deduct their charitable contributions.
Another reason behind the lower tax return was due to a limitation on annual church donations. The IRS said this year that an individual’s total church donations, plus all other charitable contributions made during the year, cannot exceed 60 percent of their adjusted gross income. If it did, individuals would not be allowed to deduct 100 percent of their donations in the current tax year.
This was a major change from tax years 2020 and 2021 only, where the contribution limit was 100 percent of adjusted gross income of qualified cash donations to charities, meaning charitable givers received a much higher refund.
The IRS warned taxpayers last November to not set their hopes too high, saying “refunds may be smaller in 2023,” which was major news for many American Christians who donate to charities every year, both for tax exemption reasons and religious reasons. In fact, one study found that 80 percent of people who identify as Christians give to charity, compared to 52 percent of those who identify as non-Christian.
