Basics of Income Tax Deductions for Donations to Charitable Organizations

Taking advantage of income tax deductions for donations to charitable organizations gives an individual more control over how his or her money is used. Potential tax money is taken out of the hands of the government and given to charities the donor wants to support. Large charitable donations of cash or assets can also create a legacy for the donor and his or her family.

However, income tax deductions have a lot of rules that must be followed in order to take the deductions and achieve the desired result. The Ohio planned giving attorneys have provided this article to help you understand the basics of income tax deductions for donations to charitable organizations.

Rules for Taking Income Tax Deductions for Donations

Charitable donations must be made to qualifying organizations
To qualify for a deduction from income taxes, a donation must be made to an organization with a 501(c)(3) IRS designation or one of the few other IRS designations that qualifies the organization to receive tax-deductible donations. Donations to churches and most religious organizations also qualify for tax deductions though they aren’t required to apply for 501(c)(3) designation. Always confirm that your gift is tax-deductible before making the donation. Donations to international causes are only tax-deductible if the receiving charity is registered as a 501(c)(3) organization in the United States.

Deduct donations from your income taxes on your annual tax return
To claim income tax deductions for donations to charitable organizations, you must file a Form 1040 tax return with the IRS and itemize your deductions on Schedule A. Every dollar you donate to a qualifying charity can be deducted dollar for dollar off your income taxes up to the limits described in the next paragraph. Non-cash contributions greater than $500 must also be reported on IRS Form 8283. Note that if your itemized deductions aren’t greater than the standard deduction of $5,800 for individuals or $11,600 for couples filing jointly, you’ll be better off taking the standard deduction and you won’t be able to claim a tax-deductible donation.

Limitations on income tax deductions for donations
Unfortunately, the IRS does not allow tax payers to deduct an unlimited amount from their taxes. The maximum amount a person can deduct from income taxes depends on their income, the type of donation and the organization receiving it. However, if your charitable donation exceeds the maximum deduction allowed, you can carry over the remainder and deduct it from income taxes in future years until the entire deductible is used up or to a maximum of five years.

Tax Deductions Limitations

Cash contributions – deduct up to 50% of your adjusted gross income

Property contributions – deduct up to 30% of your adjusted gross income

Contributions of Capital Gain Assets – deduct up to 20% of your adjusted gross income

Donations to certain charitable organizations, including most private foundations, are only eligible for a maximum deduction equal to 30% of your adjusted gross income for cash donations and lower limits for other types of donations. In Ohio, the planned giving attorneys at Gudorf Law Group, LLC can help you determine which organizations qualify for the maximum deduction.

Other rules you need to know about income tax deductions for donations

  • Contributions must be made by December 31 of the year for which you want to apply the corresponding tax deduction
  • If you receive a benefit for making a donation, such as tickets to an event, you can only deduct the amount of donation in excess of the fair market value of the benefit
  • The IRS requires supporting documents for all donations of more than $250. Keep good records of your charitable donations, including cancelled checks, acknowledgement letters from charitable organizations, and appraisals for donated property.

When planning charitable donations and taking income tax deductions for donations, there are many details that must be considered and due diligence work to be done. In Ohio, the planned giving attorneys at Gudorf Law Group, LLC, can help you develop a planned giving strategy that achieves your tax goals, minimize the hassles involved and help find qualifying charitable organizations that represent your interests. Arrange a free consultation with our Ohio planned giving attorneys by calling 1-877-483-6730.