Charitable contributions, whether in the form of cash or property, are deductible if they are made to a qualified organization. IRS Publication 526 provides a broad overview of the kinds of organizations that qualify, and you can also look for an organization at the IRS Tax Exempt Organization Search tool here.
The amount a taxpayer can deduct for charitable contributions is generally limited to no more than 60% of their AGI. Their deduction may be further limited to 50%, 30%, or 20% of their AGI, depending on the type of property given and the type of organization it was given to.
The amount of a charitable contribution that may be deductible is based on the limitation category:
- Qualified conservation contributions subject to the limit based on 100% of AGI
- Cash contributions subject to the limit based on 60% of AGI
- Noncash contributions subject to the limit based on 50% of AGI
- Contributions (other than capital gain property) subject to the limit based on 30% of AGI
- Contributions of capital gain property subject to the limit based on 30% of AGI
- Contributions subject to the limit based on 20% of AGI
- Qualified conservation contributions subject to the limit based on 50% of AGI
50% limit organizations
For the purpose of applying the deduction limits, qualified organizations are divided into two categories: 50% limit organizations and all others. 50% limit organizations are as follows:
- Churches and conventions or associations of churches.
- Educational organizations with a regular faculty and curriculum that normally have a regularly enrolled student body attending classes on site.
- Hospitals and certain medical research organizations associated with these hospitals.
- Organizations that are operated only to receive, hold, invest, and administer property and to make expenditures to or for the benefit of state and municipal colleges and universities and that normally receive substantial support from the United States or any state or their political subdivisions, or from the general public.
- The United States or any state, the District of Columbia, a U.S. possession (including Puerto Rico), a political subdivision of a state or U.S. possession, or an Indian tribal government or any of its subdivisions that perform substantial government functions.
- Publicly supported charities, defined earlier under Qualified Conservation Contribution.
- Organizations that may not qualify as “publicly supported” but that meet other tests showing they respond to the needs of the general public, not a limited number of donors or other persons. They must normally receive more than one-third of their support either from organizations 1 through 6 above, or from persons other than “disqualified persons.”
- Most organizations operated or controlled by, and operated for the benefit of, those organizations described in 1 through 7 above.
- Private operating foundations.
- Private nonoperating foundations that make qualifying distributions of 100% of contributions within 2-1/2 months following the year they receive the contribution. (A deduction for charitable contributions to a private nonoperating foundation must be supported by evidence from the foundation confirming it made the qualifying distributions timely, with a copy of this evidence attached to the tax return.)
- A private foundation whose contributions are pooled into a common fund, if the foundation would be described in item 8 but for the right of substantial contributors to name the public charities that receive contributions from the fund. The foundation must distribute the common fund's income within 2-1/2 months following the tax year in which it was realized and must distribute the corpus not later than 1 year after the donor's death (or after the death of the donor's surviving spouse if the spouse can name the recipients of the corpus).
Noncash contributions to a 50% limit organization are limited to 50% of AGI minus 60% cash contributions, with two exceptions:
- For noncash contributions of capital gain property, the limit is 30% if the amount of the deduction is figured using fair market value. (Otherwise, the limit is 50% if the amount of the deduction is figured using cost basis.)
- For noncash contributions that are "for the use of" a qualified organization, instead of "to" the qualified organization, a 20% or 30% limit applies. (A contribution is “for the use of” a qualified organization when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement.)
Additionally, qualified conservation contributions (QCCs) are limited to 50% of AGI minus the deduction for all other charitable contributions.
The 30% limit
Cash contributions or noncash contributions (other than capital gain property) either made to a 50% limit organization or made "for the use of" a qualified organization are limited to the smaller of (a) 30% of AGI or (b) 50% of AGI minus all contributions to 50% limit organizations (other than contributions subject to a 100% limit or qualified conservation contributions).
Additionally, the taxpayer can deduct 30% of the qualifying expenses for a foreign or American student who (a) lives in their home under a written agreement with a qualified organization as part of a program of the organization to provide educational opportunities for the student, (b) is not related to or a dependent of the taxpayer, and (c) is a full-time K-12 student at a school in the United States. See Publication 526 for details about expenses that qualify.
Overall, there are two 30% limits that may apply to the taxpayer's contributions:
- The 30% limit for capital gain property contributions to a 50% limit organization, and
- The 30% limit that applies to their other contributions.
Both are separately reduced by contributions made to a 50% limit organization, but the amount allowed after applying one of the 30% limits doesn't reduce the amount allowed after applying the other 30% limit. However, as a result of applying the separate limits, the total contributions subject to a 30% limit will never be more than 50% of AGI.
The 20% limit
Noncash contributions of capital gain property to either a non-50% limit organization or "for the use of" a qualified organization are limited to the smallest of the following:
- 20% of AGI.
- 30% of AGI minus all contributions subject to a limit based on 30% of AGI.
- 30% of AGI minus all capital gain contributions subject to the limit based on 30% of AGI.
- 50% of AGI minus all contributions subject to the limits based on 60%, 50%, and 30% of AGI (other than qualified conservation contributions).
Worksheet 2
TaxSlayer Pro uses Worksheet 2 in Publication 526 to figure the amount a taxpayer may deduct as well as any carryover(s) to the following year. Worksheet 2 incorporates all the limits and calculates for each category of contribution the amount of the deduction as well as any carryover to the following year. If you have questions regarding the deductible charitable contribution amount in a given return, print the return and examine Worksheet 2.
Additional Information: