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Charitable Contribution 50% Limit Information

March 28, 2009 6:46 am / Leave a comment

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.)

Some Important Facts about Tax Exempt Organizations

March 27, 2009 7:19 pm / Leave a comment

Every year, millions of taxpayers donate money to charitable organizations. Here are six things you should know about the tax treatment of tax-exempt organizations.

Tax returns are made available to public. Exempt organizations generally must make their tax return available for public inspection. This also includes the organization’s application for exemption. These documents must be made available to any individual who requests them, and must be made available immediately when the request is made in person. If the request is made in writing, an organization has 30 days to provide a copy of the information.

Donor lists generally are not public information. The list of donors filed with Form 990 is specifically excluded from the information available for public inspection. There is an exception for donors to private foundations and political organizations, which must make their donor list available to the public.

How to find tax-exempt organizations. The easiest way to find out whether an organization is qualified to receive deductible contributions is to ask them, as most will be able to tell you. You can also search for organizations qualified to accept deductible contributions in IRS Publication 78, available online at IRS.gov.

Which organizations may accept charitable contributions. Not all exempt organizations are eligible to receive tax-deductible charitable contributions. Organizations that are eligible to receive deductible contributions include most charities described in section 501(c)(3) of the Internal Revenue Code and, in some circumstances, fraternal organizations described in section 501(c)(8) or section 501(c)(10), cemetery companies described in section 501(c)(13), volunteer fire departments described in section 501(c)(4), and veterans organizations described in section 501(c)(4) or 501(c)(19). For more general information on the rules for Charitable Contribution Deductions, you can go to the IRS Publication 78 Help page, Part II, which is linked from the Search for Charities page on IRS.gov.

Requirement for organizations not able to accept deductible contributions. If an exempt organization is ineligible to receive tax-deductible contributions, it must disclose that fact when soliciting contributions.

How to report inappropriate activities by a charity. If you believe that the activities or operations of a tax-exempt organization are inconsistent with its tax-exempt status, you may file a complaint with the Exempt Organizations Examination Division by completing Form 13909, Tax-Exempt Organization Complaint (Referral) Form. The complaint should contain all relevant facts concerning the alleged violation of tax law. Form 13909 is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:
IRS Publication 526, Charitable Contributions (PDF)
Search for Charities Using Publication 78
Form 13909, Tax-Exempt Organization Complaint (Referral) Form (PDF)

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