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Tax Deduction Available for MA Charitable Contributions

September 05, 2023

Attention Massachusetts taxpayers…you can now claim a state income tax deduction for charitable donations made in taxable years beginning on or after January 1, 2023. Here’s what you should know.

Charitable contributions represent one of the most common - and in some cases, valuable - tax planning strategies with regard to giving to charity, securing monetary benefits for donors and family members and reducing income, estate and gift taxes. If you’re a MA resident, you will want to read up on new valuable opportunities to make charitable contributions.

More about the charitable deduction

A common tax saving method, especially at year-end is donating to charity. A donation to a qualified charitable organization can be deducted on schedule A of your federal income tax return as an itemized deduction. Donations can be made in the form of cash, property or appreciated shares of stock.

What’s new in 2023?

Check out our blog, “Millionaires Tax” Approved in Massachusetts. Joining nine other states plus Washington, D.C., MA will now assess an additional 4% surcharge on income over $1,000,000. For taxpayers reporting more than $1,000,000 in MA taxable income (indexed for inflation each year) this means ordinary income and long-term capital gains will be taxed at 9%, while short-term capital gains will be taxed at 16%.

Given the new Millionaire's Tax in Massachusetts, the capacity to lower a taxpayer's state income tax liability could prove especially advantageous this year.

Taxpayers are able to reduce their state income tax by claiming deductions for charitable contributions made during the taxable year. Keep in mind that this includes donations to "life income" charitable instruments, like charitable gift annuities and charitable remainder trusts. The deduction amount is equivalent to the sum contributed beyond the value of the life income interest received by the donor.

Benefits for charitable organizations

The incentive to make charitable contributions also benefits public charities that depend on donated funds. Being classified as a public charity, rather than private foundation comes with notable benefits, so public charities must demonstrate widespread public backing to uphold this status.

Given the new incentive to donate, public charities stand to benefit greatly. The more donations that come through the easier it is for public charities to fulfill their missions and meet the essential threshold of public support.

Questions? Contact us.

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