You may claim as an itemized deduction, charitable contributions of money or property made to qualified charitable organizations. Generally, you may deduct up to 50% of your adjusted gross income, but 20% and 30% limitations apply in some cases. You may deduct a charitable contribution made to, or for the use of, any organization that is qualified under the Internal Revenue Code. You deduct your charitable contributions, including your carryover from a previous year, on lines 16 through 18 of Schedule A.
Qualified charitable organizations include the following:
- Churches, synagogues, and religious organizations.
- Salvation Army, Red Cross, CARE, Goodwill Industries, United Way, Boy and Girl Scouts, Boys and Girls Club of America, etc.
- War veterans’ organizations.
- Nonprofit schools and hospitals.
- Federal, state, and local governments (if gifts are for public purposes).
- Civil defense organizations.
- Public parks and recreation facilities.
- Most nonprofit charitable organizations.
- Nonprofit volunteer fire companies.
- A nonprofit cemetery company, if the funds are irrevocably dedicated to the perpetual care of the cemetery as a whole, and not for a particular lot or mausoleum crypt.
What contributions are deductible?
Deductible items include the following:
- Dues and fees.
- Amounts paid to a qualified organization above the value of any benefits received from the organization in return.
- Used clothing, furniture, etc. The fair market values of these items are deductible, and the items must be in good used condition.
- Used vehicles, boats, and airplanes (see below).
- The cost and upkeep of uniforms worn while performing donated services. These uniforms however, must not be for general wear.
- Un-reimbursed transportation expenses that relate directly to the service to be performed for the qualified organization.
- The part of your contribution above fair market value for items such as merchandise, tickets, charity balls, or sporting events.
The following items are NOT deductible contributions:
- Contributions to country clubs and other social clubs.
- Contributions to civic leagues, sports clubs, labor unions.
- Contributions to chamber of commerce and other business organizations.
- Tuition payments.
- Cost of raffle, bingo, or lottery tickets.
- Value of your time or services.
- Political contributions.
- Blood donated to a blood bank or to the Red Cross.
- Car depreciation, insurance, general repairs, or maintenance.
- Any contribution that is earmarked for the use of a specific individual.
- Sickness or burial expenses for members of a fraternal society.
- Part of a contribution that personally benefits you.
- Contributions made to groups that are run for personal profits.
- Contributions made to groups whose purpose is to lobby for law changes.
- Contributions to lobbyist groups.
If you give a contribution and receive a benefit in return, you are allowed to deduct only the amount of the contribution that is more than the fair market value of the benefit received.
To be deductible, contributions must actually be paid in cash or other property before the close of your tax year, whether you use the cash or accrual method. It is very important that you keep proper records of all your cash and non-cash contributions.
Contributions by cash
You cannot deduct a cash contribution, regardless of the amount, unless you keep a record of the contribution. The following rules apply:
- For individual contributions under $250, your proof can be your canceled check or your receipt, or a bank statement containing the name of the charity, the date, and the amount.
- For individual contributions of $250 or more, you must obtain a written acknowledgement, as proof of the contribution. In figuring whether a contribution is $250 or more, you must not combine separate contributions to the same organization; each payment is treated as a separate contribution.
- A written acknowledgement for a contribution of $250 or more must be received before the due date of the return (including extensions) and must include: (a) the amount of the cash contribution, (b) whether the qualified organization gave you any goods or services in return (other than certain token items and membership benefits), and (c) a description and good faith estimate of the value of any goods or services provided to you in return for the contribution, if any.
Generally, non-cash charitable contributions made to charitable organizations are tax deductible on your tax return at the fair market value (FMV) of the property contributed.
- For donations of used cars, boats, airplanes, if you claim a value of $500 or more for any of these items, you must obtain a written acknowledgement from the organization. The deduction allowed is the smaller of the fair market value (FMV) on the date of the contribution, or the gross proceeds received from the sale of the item.
- For donated motor vehicles, a used car guide can be used to determine the FMV of the vehicle.
- You must file Form 8283, Noncash Charitable Contributions with your return if your total deduction for non-cash contributions for the year is over $500.
Non-cash contributions over $5,000
If you donate non-cash property valued at over $5,000 to a qualified organization, the following rules apply:
- If the value of the property (other than publicly traded securities) exceeds $5,000, a qualified appraisal of the property must be done.
- You must attach Form 8283 to the tax return to support the charitable deduction, and the donee must sign Part IV of Section B, Form 8283.
- The person who signs for the donee must be an official who is authorized to sign the donee’s tax or information returns, or a person specifically authorized to sign by that official.
- The signature does not represent concurrence in the appraised value of the contributed property.
- A signed acknowledgement represents receipt of the property described on Form 8283 on the date specified on the form. The signature also indicates knowledge of the information reporting requirements on dispositions. A copy of Form 8283 must be given to the donee.
Donating your services
You cannot claim a deduction for the value of your services contributed to a qualified organization, including the value of lost income while working as an unpaid volunteer. Some expenses incurred while working as a volunteer, however, are deductible if they are:
- Directly connected with the service.
- Solely attributable to the service.
- Not personal, living, or family expenses.
For example, you can deduct either your actual car expenses, or the standard rate of 14 cents per mile. You can deduct travel expenses only if there is no significant element of personal pleasure, recreation, or vacation in such travel.
Limits on the charitable contribution deduction
As stated above, your charitable contribution deduction may be limited to a certain percentage of your adjusted gross income. The amount of the deduction may be limited to 50%, 30%, or 20% of your adjusted gross income, depending on the type of charitable organization.
In general, if a taxpayer contributes cash or short-term capital gain property to a public charity, the contributions may be deducted up to 50% of adjusted gross income, computed without regard to net operating loss carry-backs.
If a donor is contributing property that would have yielded a long-term capital gain in a sale, then the deduction for the contribution is limited to 30% of donor’s adjusted gross income in the year of donation if the donee is a public charity, and limited to 20% if the donee is a private foundation.
Charitable contributions in excess of these limits can be carried over to the following tax year. The excess contributions can be carried over for a maximum of five years.