By Stacie Clifford Kitts, CPA
If you itemize your deductions, (that means that you are completing a Schedule A-Itemized Deductions along with your Form 1040) you are entitled to take a deduction for your charitable contributions. However, there is a limit to how much of a deduction you can claim in a tax year.
Contribution deductions are limited to a percentage of your adjusted gross income. This means that your total contribution deductions cannot exceed 50%, 30%, or 20% of your adjusted gross income depending on the type of charitable organization you dontate to or the type of property that you donated.
If you donate cash to a 50% limit organization, the amount of your deduction is limited to 50% of your adjusted gross income. Any remaining amount can be deducted in each of the next 5 years until it is used up.
Only the following types of organizations are 50% limit organizations.
1) Churches, and conventions or association of churches
2) Educational organization with a regular faculty and curriculum that normally have a regularly enrolled student body attending classes on site.
3) Hospitals and certain medical research or-organizations associated with these hospitals.
4) 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.
5) 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.
6) Corporations, trusts, or community chests, funds, or foundation organized and operated only for charitable, religious, educational, scientific, or literary purposes, or to prevent cruelty to children or animals, or to foster certain national or international amateur sports competitions. These organizations must be “publicly supported,” which means they normally must receive a substantial part of their support, other than income from their exempt activities, from direct or indirect contributions from the general public or from government units.
7) Organizations that may not qualify as “publicly supported” under (6) 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 described in (1) through (6), or from persons other than “disqualified persons.”
8) Most organizations operated or controlled by, and operated for the benefit of, those organizations described in (1) through (7).
9) Private operating foundations.
10) Private non-operating foundations that make qualify distribution of 100% of contributions within 2 ½ months following the year they receive the contribution. A deduction for charitable contrition to any of these private non-operating foundations must be supported by evidence from the foundation confirming that it made the qualifying distributions timely. Attach a copy of this supporting data to your tax return.
11) A private foundation whose contributions are pooled into a common fund, if the foundation would be described in (8) above 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 ½ months following the year in which it was realized and must distribute the corpus not later than 1 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.)