What are the Tax Breaks for Donating to Charity?

by A. Elizabeth Freeman, Demand Media
    The check you write to a charity can mean less tax for you.

    The check you write to a charity can mean less tax for you.

    Making a charitable donation does more than make you feel warm and fuzzy inside and does more than help out a nonprofit charity. In many cases, the money or goods you donate to charity can lead to a tax break for you, as you can subtract the amount of your donation from your income for the year. To claim the tax break, you do need to itemize. So if you claim the standard deduction, you have to settle for knowing that your donation has helped others but not you.

    Types of Donations

    You aren't limited to donating money to a charity. If you donate property, you can usually claim the fair market value of that property. For example, if you donate a designer dress that you could sell to another person for $100, you can claim that $100 is the value of the dress. The Internal Revenue Service has some stringent rules about donating objects and claiming them on your tax return. You can't donate a stained, ripped T-shirt and expect to claim it, for example. Unless the property is appraised at more than $500, it must be in good, usable condition for you to get a tax break from it.

    Eligible Organizations

    A charitable organization will let you know whether or not your donation is tax deductible. If you aren't sure, though, the IRS has a few guidelines in place regarding what organizations qualify. Organizations that have a charitable, religious, scientific, educational or literary mission all qualify, as do organizations that aim to prevent cruelty to animals or children. Governments, veterans' societies and fraternal orders are also eligible, as are some cemeteries. You don't get a tax break when you donate to a nonprofit that has a specific agenda, such as a political organization. You also don't get a tax break if you give a needy person money to help him out.

    Claiming the Deduction

    To claim the deduction, you need to fill out form 1040 and schedule A. You also need to have proof of the donation that you are deducting. The type of proof you need depends on the amount and type of the donation. For a cash donation of less than $250, you can use a canceled check or your bank statement as proof. Cash donations of more than $250 need a written communication from the organization to serve as proof. If you donate more than $500 in non-cash property, you need to fill out Form 8283 along with your Schedule A.

    Limits

    If you're the extremely generous type, you might need to be aware of a few limits the IRS has in place when it comes to charitable donations. You only need to start worrying about limits if you donate more than 20 percent of your adjusted gross income in a single year. In most cases, the limit for donations is 50 percent of your income. Some donations are limited to 30 or 20 percent, though, such as donations to fraternal societies, which are limited to 30 percent of your income. If you donate capital gains, you're limited to 20 percent of your income.

    About the Author

    Based in Pennsylvania, A. Elizabeth Freeman has been writing professionally since 2007, when she started writing theater reviews for OffOffOnline.com and Theater Talk's New Theater Corps blog. Since then, she has written for Phillyist, TheNest, ModernMom and "Rhode Island Home and Design" magazine, among others. Freeman has an Master of Fine Arts in dramaturgy/theater criticism from CUNY/Brooklyn College.

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