The Internal Revenue Service rewards your charitable gift with a tax deduction, but only to a certain extent. Each year, you're limited to deducting no more than 50 percent of your adjusted gross income. Deductions for certain types of contributions have lower limits. For example, a deduction for the gift of property that's gone up in value, such as stock, cannot exceed 30 percent of your adjusted gross income. The good news is that you can carry over from one income tax return to five future returns any amount that exceeds a stipulated threshold.
Calculate your charitable deduction carry-over from the previous year by subtracting your donations from the adjusted gross income limits. For example, if you donated $40,000 in cash to a 50 percent limit organization, and your adjusted gross income limit is only $30,000, you can carry over $10,000.
Report the amount of your donation deduction carry-over on line 18 of Schedule A. Continuing the example, report $10,000 on line 18 of Schedule A.
Combine the charitable deduction carry-over with your other charitable deductions for the year and report the total on line 19. This amount, plus your other itemized deductions for the year, reduces your taxable income for the year by replacing the standard deduction on line 40 of your Form 1040 return.
- Even though you are not required to send them in with your tax return, keep the receipts or other records that support your charitable donation deduction in case you're audited.
- The carry-over only applies if you weren't able to deduct your charitable contributions because of the adjusted gross income limits. If you couldn't claim your charitable donations because you didn't itemize, you can't carry over the amount you didn't deduct.
Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."