Giving to charities has been a significant aspect of American lifestyle and culture for generations. Americans give hundreds of billions of dollars annually to charities that range from churches and other religious organizations to scholarships and other educational interests to arts and culture causes to various non-profit foundations.
As the US government has grown beyond its intended purpose, often being guilty of wasting taxpayer money or engaging in activities that are contrary to the personal wishes of many of its citizens, tax payers have increasingly sought out legal ways to direct their means towards organizations that align more closely with their preferences.
Qualified Charitable Organizations
The IRS defines which charitable organizations qualify for tax deductible donations in section 170(c) of its tax code. The following eight types of organizations, listed on the IRS's Charitable Contribution Deductions, are designated as ones that qualify for tax deductible charitable contributions.
It is not always simple to determine whether a particular organization falls within the realm of the various types of organizations listed here in the IRS guidelines. In situations where you are unable to easily determine whether an organization you're considering donating to qualifies, you should be able to determine for sure whether the organization qualifies by speaking with a representative from the organization or by consulting an experienced tax preparer. The IRS also publishes a tool called the Exempt Organizations Select Check, which you can use to search for a specific organization to check its qualification status.
One word of caution when considering what is a qualified non-profit organization. Donations made to specific organizations, political organizations, or specific candidates are specifically noted by the IRS as not being tax-deductible.
How Much Can Be Deducted from Taxes for Charitable Contributions?
The IRS has limits on how much of your charitable donation(s) can be deducted from your tax liability. Charitable contribution write-offs are limited to a maximum of 50% of your adjusted gross income (AGI) for the most common charities, such as public charities and private operating foundations. For others types of charities, such as fraternal lodges and private foundations, the limit is 30%. Maximum allowable donations for other types of charities varies depending upon various factors.
How To Deduct Charitable Donations from Taxes
Deductions for donations to charities are realized by completing and filing IRS Form 1040, which allows you to itemize your deductions. Charitable contributions are listed on Form 1040, Schedule A
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| IRS Form 1040 includes a line for itemized deductions from Schedule A. These deductions reduce your tax liability. |
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| Schedule A of IRS Form 1040 includes a section to itemize charitable gifts made during the pertinent tax year. |
Other Things to Consider
Situations are as unique as the people and system who create them, which means that there are lots of other things to consider to understand how tax deductible donations work. For instance, donating physical items instead of cash have specific rules that apply. For instance, if you claim a deduction for an item that is valued at over $5,000, the IRS requires filling out a separate form as validation of the value of that donation, which may require an appraisal. Also, if your donation involves items (such as items purchased at a fundraiser auction) that you received in exchange, the IRS only allows you to write off the portion of the donation that exceeds the fair market value of the items received.
Summary
There are thousands of worthy organizations and purposes to which any particular philanthropic taxpayer can donate money or gifts and receive a tax deduction benefit. The information from this article should provide a foundation for understanding how charitable gifts are used for tax deduction purposes.
For more specific guidance on how to donate with tax deductions in mind, refer to a competent tax adviser.
