Deducting Charitable Contributions
It's good to give.
It's good to give. And for your kindness, the IRS rewards you with deductions for charitable contributions . . . if you itemize. (An allowance for charitable gifts is built in to the standard deduction for taxpayers who claim it rather than itemizing.) Generally, your deduction for donations to charity in one year cannot exceed 50% of your adjusted gross income for that year (30% in the case of donations of appreciated assets and contributions to private foundations). And, of course, there are lots of rules regulating how to go about writing off your generosity.
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What's Deductible? -- A to Z
Appraisal fees for donated property. You can deduct appraisal fees paid to determine the value of a donation. Instead of adding it to your charitable deduction, this is a miscellaneous itemized deduction subject to the 2%-of-adjusted-gross-income limit.
Appreciated property. Donating appreciated property -- such as stocks, bonds, mutual funds or real estate -- can supercharge the tax-saving power of your generosity. If you have owned the asset for more than one year, you can deduct the full market value at the time of the gift, not just what you paid for it. This lets you avoid the tax you would incur if you sold the property as well as enjoy the money-saving power of the deduction.
Art. Some taxpayers give a partial interest in art to museums and share ownership of the work and display rights. If you don't give away the entire interest within ten years, or if the museum never takes possession of the item during that period, your deduction is recaptured, meaning you have to pay back the tax savings, with interest plus a penalty.
Automobile, driving for charity. You can deduct 14 cents per mile for each mile you drove while performing services for a charity in 2010.
Automobile, donating to charity. Strict rules control your charitable deduction of a donated vehicle. In most cases, your deduction is limited to the amount the charity sells the car for to raise cash. You should get an acknowledgment from the charity reporting the deductible amount within 30 days after the date the vehicle is sold.
Bargain sales to charity. If you sell to a charity an appreciated asset you owned for more than one year, you can deduct the difference between the market value and the sales price as a charitable donation. But if the sales price is more than what you paid for the asset, you will have a taxable gain that will effectively offset part of the tax savings.
Benefits received for donations. If you receive more than a token benefit from a charity in return for your donation, you must subtract the value of that item to determine your deductible contribution.
Carryovers. Generally, your deduction for donations to charity in one year cannot exceed 50% of your adjusted gross income for that year (30% in the case of donations of appreciated assets and contributions to private foundations). Any excess can be carried over for the following five tax years and applied to reduce income then. If you die before the carryover is used up, it expires; your heirs cannot claim it.
Cash contributions. You can deduct cash contributions to qualifying charities. These include churches, synagogues, other religious organizations, educational organizations and nonprofit organizations such as the Salvation Army, Red Cross, CARE, Goodwill. You need a receipt or bank record (such as a cancelled check) for all contributions.
Charitable lead trusts. These trusts pay an annuity or other fixed amount to a charity for a set term of years. Any balance remaining at the end of that period is paid to the donor or another beneficiary. The donor gets to deduct in the year the trust is established the amount that's expected to go to the charity. The exact amount is computed using IRS annuity tables.
Charitable remainder trusts. These trusts pay an annuity or other fixed amount to the donor or another beneficiary for a set term or for life. Any balance remaining at the death of the donor or beneficiary is paid to a charity. The donor gets to deduct in the year the trust is established the amount that's expected to go to the charity. The exact amount is computed using IRS annuity tables.
Conservation easements. If you donate to a conservation group or a state or local government an easement to restrict development of your property, you are entitled to a tax deduction for the resulting decline in value of your property. If you make such a donation in 2010, your deduction can offset up to 50% of your adjusted gross income. Any excess write-offs can be carried forward for 15 years.
Driving for charity. You can deduct 14 cents per mile for each mile you drove while performing services for a charity in 2010.
Exchange students. You can deduct up to $50 a month of the unreimbursed costs of hosting an American or foreign exchange student placed in your home by a charity. (You don't get this deduction if, at the same time, your child is living with a family in a foreign country.)
Façade easements. A donation to a qualifying charity that preserves the façade of a historic building can be deducted.
Fundraiser hosting costs. If you host a fundraising event for a charity, your unreimbursed expenses are a deductible charitable contribution.
High Holy Days tickets. Amounts you pay to a synagogue for tickets to special religious events are deductible charitable contributions.
IRA donations. In 2010 (and 2011), taxpayers age 70½ and older can donate up to $100,000 directly from their IRAs to charity. No deduction is allowed for the contribution, but neither does the IRA payout show up in the taxpayer’s taxable income. The contribution counts as part or all of the taxpayers required minimum distribution.
Meals and lodging for overnight trips for charity. You can deduct the cost of unreimbursed meals and lodging you paid for while on an overnight trip for a charity.
Non-cash contributions. You are allowed to deduct the full fair market value of assets that you have owned for one year or more and donate to charity. If you give property with a total value of more than $500, you will need to file Form 8283 and give details about the assets, including a description of them and their individual values. If their value is more than $5,000, you generally will need to attach an appraisal, unless you give listed securities. Note that if you donate used clothing or household items such as furniture, appliances, linens and electronics, you cannot deduct the value of the items unless they are in good condition or better.
Out-of-pocket contributions. Expenses you incur while working for a charity -- from the cost of driving your car (at 14 cents a mile) to the cost of stamps for a fundraiser to the cost of ingredients for a casserole for a church-sponsored soup kitchen -- can be included in your charitable contribution deduction.
Patent donations. If you donate a patent to charity, you can deduct the value of the patent plus a percentage of the income that the charity earns on the patent for a period of up to ten years.
Pew rents. Amounts you pay to a church for pew rents are a deductible charitable contribution.
Preferred seating at college sports events. If you make a contribution to a university and receive the right to preferred seating at sporting events, you can deduct 80% of the donation. Any amount included for the tickets themselves must first be subtracted from the contribution.
Receipts. You must have a receipt or bank record (such as a canceled check) to substantiate every cash donation you deduct. For contributions of $250 or more, you must have a written acknowledgement for the charity; a bank record alone is not enough.
Remainder interests in homes and farms. If you agree to give your home or farm to a charity after a term of years, you can deduct as a donation the present value of the charity's remainder interest in the property.
Time and skill. You do not get to deduct the value of your labor you contribute to charity. After all, if you charged the charity for your services, the amount you received would be taxable income. Not receiving the payment puts you in the same position, tax-wise, as being paid and then contributing the cash back to the charity for a deduction to offset the added income.
Too much generosity. See Carryovers.
Vehicle donations. Strict rules control your charitable deduction of a donated vehicle. In most cases, your deduction is limited to the price paid for the vehicle when it is sold by the charity to raise cash. In general, no deduction is allowed unless you receive an acknowledgment from the charity within 30 days after the date the vehicle is sold.
See our other taxopedias.