What Is a Charitable Contributions Deduction?

The charitable contributions deduction reduces 澳洲幸运5官方开奖结果体彩网:taxable income by allowing individual taxpayers and businesses to deduct contributions of cash and property to 澳洲幸运5官方开奖结果体彩网:qualified charitable organizations. The amount deducted in a year is subject to limits that depend on the type of donation and how individuals fil🅠e their taxes.

How the Charitable Contributions D♛eduction Works

Donations to a qualified charity are deductible for taxpayers who 澳洲幸运5官方开奖结果体彩网:itemize their deductions using 澳洲幸运5官方开奖结果体彩网:Schedule A of IRS 澳洲幸运5官方开奖结果体彩网:Form 1040. Cash donations are limited to 60% of the taxpayer’s 澳洲幸运5官方开奖结果体彩网:adjusted gross income (AGI).

Qualified organizations include nonprofit entities whose purpose is religious, charitable, educational, scientific, or literary. Groups that work to prevent cruelty to children or animals also qualify. 

For individuals who contribute property to a qualified organization, the charitable contribution is calculated as the 澳洲幸运5官方开奖结果体彩网:fair market value at the time of the contribution. Some contributions can be limited to 50%, 30%, or 20% of AGI, depending on the type of property and organization receiving the donation. For example, 澳洲幸运5官方开奖结果体彩网:capital gains and property donations, such as appreciated stock, are limited to 30% of AGI.

The deduction for food inventory is 15% for those business owners who donate from their trade to help those in need, and the food supports the receiving organization’s mission. The donation must also meet the requirements of the Federal Food, Drug, and Cosmetic Act.

Examples of Qualified Organizations

To deduct charitable contributions, the recipient charity must be a qualified organization according to the IRS and include:

• A trust, community chest, or foundation created in the United States that is operated exclusively for scientific, religious, charitable, or literary purposes
• A U.S. organization developed to prevent cruelty to animals or children
• A synagogue, mosque, church, or other religious organization
• A volunteer, not-for-profit fire company
• A war veterans organization
• A civil defense organization created under local, state, or federal law, including any unreimbursed expenses of civil defense volunteers that are directly connected to their volunteer services
• A domestic fraternal society that functions under a lodge system, but the donation is only deductible if it is used for community outreach or other charitable purposes
• A nonprofit cemetery, but only if the funds are used to care for the cemetery as a whole vs. a particular tombstone, mausoleum, crypt, or other marker

Record Keeping

Individuals can deduct contributions only in the year in which they donate. This applies whether the taxpayers use the cash or accrual method of accounting. Those who claim deductions for your chꦯaritable contributions need to record each donation.

The records must prove the amount and denote whether the donation was cash, non-cash, or out-of-pocket expenses. The receiving organization must provide a written statement to the donor for contributions that total more than $75 and define if the donation was partly a contribution and partly for goods or services.

The Bottom Line

The charitable contributions deduction allows taxpayers to deduct donations of cash and property given to qualified charitable organizat𝓀ions. When filing, individuals or businesses must itemize deductions on Schedule A of IRS Form 1040.

Limits apply to charitable contribution deductions based on IRS limits—60% of the taxpayer’s adjusted gross income (AGI), although some exceptions apply.