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Deducting Charitable Donations Part 3 – Limitations on Your Contributions

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This is the last part of the three part series. The other two are:

Part 1 – Qualified Organizations – You can only deduct donations if these are made to qualified organizations. Also discusses organizations that are not qualified by the IRS.

Part 2 – Items You Can Deduct – Discussed the items that you can or cannot deduct and the various reporting requirements.

Part 3 – Limitations on Your Contributions – discusses on how much donations you can deduct for the year

This article will discuss the limitations on your the donations made to a qualified organization.

The amount of your deduction for charitable donation is limited to 50 percent of your adjusted gross income (AGI). Moreover, it may be limited to 30 percent or 20 percent of your AGI depending on the type of property you donated and the type of organization you donated it to.

Rules on the 50% Limitations

The 50% of your AGI limit is applicable to the total of all charitable donations you made during the year. This means that your deduction for charitable donations cannot be more than the 50% of your AGI. In general, this 50% limit is only applicable to gifts made to the following organizations (also called as the 50% limit organizations)

  • Churches and conventions or associations of churches
  • Educational institutions with a regular faculty and curriculum that have regularly enrolled students attending classes on site.
  • Hospitals and certain medical research organizations associate with these hospitals
  • Publicly supported charities.

One exception to donations to the 50% limit organization is if the gifts are capital gain property for which you figure your deduction using fair market value without reduction for appreciation, you can only deduct up to 30% of your AGI.

Rules on the 30% Limitations

A 30% limit is applicable to the following donations:

  • Donations made to all qualified organizations other than the 50% limit organizations. Examples of this organizations are non-profit cemeteries, veteran’s organization, fraternal societies, and certain private non-operating organizations.
  • Donations for the use of any organizations.

However, if these gifts are of capital gain property, they are subject to the 20% limit.

Special 30% Limit for Capital Gain Property

A special 30% limit is applicable to donations of capital gain property to 50% limit organizations. However, this special 30% limit does not apply when you choose to reduce the fair market value of the property by the amount that would have been long-term capital gain if you sold the property. Instead, only the 50% limit applies.

Rules on the 20% Limitations

This limit is applicable to all gifts of all capital gain property to or for the use of qualified organizations (other than gifts of capital gain property to 50% limit organization)

Carryovers of Your Contributions

You can carry over your contributions that you are not able to deduct in the current year because they exceed your AGI limits. You can deduct the excess in each of the next 5 years until is totally exhausted, but not beyond that time.

Source: IRS Publication 17