How do you determine the limit on cash charitable contributions when married filing separately for high earners?
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To determine the limit on cash charitable contributions for a taxpayer who is married filing separately and is a high earner, you must apply the percentage limitations and coordination rules set out in IRC §170 and related regulations, as well as consider the impact of the taxpayer’s adjusted gross income (AGI) and the specific rules for married individuals filing separately.
1. General Percentage Limitation for Cash Contributions
For cash contributions to most public charities (organizations described in IRC §170(b)(1)(A)), the deduction is generally limited to a percentage of the taxpayer’s "contribution base," which is essentially their AGI (computed without regard to any net operating loss carryback):
- For tax years beginning after December 31, 2025, the limit for cash contributions is 60% of the taxpayer’s contribution base, reduced by the amount of any contributions allowed under IRC §170(b)(1)(A) for the year.
Special Rule for Married Filing Separately
- If a married couple files separately, each spouse is treated as a separate taxpayer. Each spouse’s deduction is limited to their own contribution base (AGI) and their own contributions.
2. High Earners: Additional Considerations
0.5% Floor (Effective for Tax Years After 2025)
- For tax years beginning after December 31, 2025, a new rule applies: charitable contributions are only deductible to the extent they exceed 0.5% of the taxpayer’s contribution base (AGI). This floor applies before applying the percentage limitations.
Pease Limitation
- The Pease limitation, which reduced itemized deductions for high-income taxpayers, has been replaced for tax years after 2025 with a new formula: itemized deductions are reduced by 2/37 of the lesser of (a) itemized deductions or (b) income above the 37% bracket threshold. This reduction applies after the percentage and floor limitations.
3. Coordination with Other Limitations
- If a taxpayer makes both cash and non-cash contributions, the cash contribution limit is reduced by the amount of other contributions allowed under IRC §170(b)(1)(A) for the year.
- If the taxpayer makes contributions to organizations subject to lower percentage limits (e.g., 30% or 20% for certain property or organizations), those limits must be applied separately, and the cash contribution limit is coordinated accordingly.
4. Carryover of Excess Contributions
- If the taxpayer’s contributions exceed the applicable limit, the excess can be carried forward for up to five succeeding tax years, subject to the same percentage limitations in those years.
5. Summary of Steps for Married Filing Separately, High Earners
- Calculate AGI (contribution base) for the individual spouse.
- Apply the 0.5% floor: Only contributions in excess of 0.5% of AGI are deductible.
- Apply the 60% limit: The deduction for cash contributions to public charities is limited to 60% of AGI, reduced by other contributions allowed under IRC §170(b)(1)(A).
- Apply the Pease-style reduction: Reduce total itemized deductions by 2/37 of the lesser of (a) itemized deductions or (b) income above the 37% bracket threshold.
- Carry forward any excess contributions for up to five years.
6. Example Calculation
Suppose a married taxpayer filing separately has an AGI of $500,000 and makes $350,000 in cash contributions to public charities in 2026:
- 0.5% floor: 0.5% × $500,000 = $2,500. Only contributions above $2,500 are deductible.
- 60% limit: 60% × $500,000 = $300,000. The maximum deduction for cash contributions is $300,000.
- Deductible amount: The lesser of ($350,000 - $2,500) or $300,000 = $297,500.
- Pease-style reduction: If the taxpayer’s itemized deductions (including the $297,500) and income above the 37% bracket threshold trigger a further reduction, apply the 2/37 formula to reduce the deduction further.
- Carryover: The $50,000 excess ($350,000 - $300,000) can be carried forward.
7. Key Points for High Earners Married Filing Separately
- Each spouse’s limit is based on their own AGI and contributions.
- The 0.5% floor and 60% AGI limit both apply.
- The Pease-style reduction further limits the deduction for high-income taxpayers.
- Excess contributions can be carried forward for five years.
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