Even if you give all your income to charity, you can't claim a 100 percent tax deduction. The IRS has multiple rules limiting how much of your charitable donations you can deduct. If you're donating 20 percent of your adjusted gross income or less, don't worry: The rules don't kick in unless you're donating at least 30 percent.
No matter how much you give, you can't write off more than 50 percent of your adjusted gross income as a charitable donation. With some organizations, the limit is even less: If you donate to veterans' organizations, fraternal societies, nonprofit cemeteries, and certain private foundations, the limit is 30 percent. Suppose, for example, that your AGI is $90,000 and you donate money to charities in both groups. Your total donations must be under $45,000 and donations to the second group must be less than $30,000.
The IRS imposes added limits if you donate capital-gain property -- items that would have triggered long-term capital gains taxes if you sold them instead of donating them. Stocks, bonds, jewelry, collectibles and real estate could all fall into this category. If you donate capital-gain property to an organization covered by the 50 percent limit, you can deduct only 30 percent of the property's fair market value. If you donate to a veteran or fraternal group instead, you can deduct only 20 percent.
When you figure out your taxes, first write off any deductions to 50 percent limit groups. If those add up to less than half of your AGI, start claiming deductions to 30 percent groups as well. If you still have some space, take the write-off for 30 percent capital-gain property, and then, finally, the 20 percent capital-gain property. If your total donations add up to more than 50 percent of your AGI, don't despair: You can carry them over to the following year.
Suppose this year's AGI is $100,000 and you've donated $25,000 in stocks to a veteran's group. You can write off 20 percent of your AGI -- $20,000 -- leaving you $5,000 you can write off on next year's taxes. If you make more donations next year, you have to claim those on your taxes first, then take the carryover. Should those donations put you over the limit, you carry the $5,000, or part of it, over to the following year. You can carry forward an unclaimed deduction for five years before losing it.
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