How Much in Charitable Deductions Can I Claim Before I'm Red-Flagged?

Donating more than 3 percent of your income doesn't automatically red-flag you.

Donating more than 3 percent of your income doesn't automatically red-flag you.

When you donate money to charity, the Internal Revenue Service might let you deduct your contributions. To qualify for the deduction, you'll have to forgo the standard deduction and instead itemize your deductions. You'll also be taking a risk, because the IRS is more likely to audit returns with itemized deductions and also watches charitable contribution write-offs closely.

Rules of Thumb

When the IRS looks at your return, it compares your deductions to the ones that similar people claim. Based on a survey of 2011 tax returns, the IRS knows that someone making between $50,000 and $100,000 per year will claim a charitable donation deduction of $2,881 on average. While writing off $2,882 in charity probably won't raise a red flag, writing off $30,000 might. The IRS' Discriminant Function System calculates a DIF score for each return that estimates how likely it is to have unreported or underreported income based on its experience with other returns in the past. The higher your score, the more likely you are to be audited.

What the IRS Seeks

The IRS doesn't only look at how much charity you claimed relative to your income. It also looks at your donations. If you give $250 or less, you will generally need to be able to prove the donation with your own records. Gifts of $250 or more need to be proved with a receipt from the organization. When you give items -- like dropping off old clothing -- you will need to be able to establish what you gave and what its value is in its condition. Larger donations can require professional appraisals and extra tax paperwork.

Hard Limits

The tax code has some hard limits on how much you can give and write off. If you donate money to a charity, organization or person that isn't registered with the IRS as a tax-exempt charity, none of your donation is deductible. You can write off up to 50 percent of your adjusted gross income, or AGI, every year as a charitable donation to most U.S. organizations. Donations to fraternal societies, cemeteries, veterans organizations and certain other charities are capped at 30 percent of your AGI. If you give property that has increased in value instead of cash or other types of contribution, the caps drop from 50 or 30 percent of your AGI to 30 and 20 percent of your AGI.

Don't Fear the (Tax) Reaper

Just because a contribution might be outside of the average doesn't mean that you shouldn't deduct it. Even if your charitable contributions are above average, the IRS looks at multiple factors when deciding whether or not to audit you. Furthermore, if you have the legally required proof that you legitimately made the donation, you should get to keep your deduction even if the IRS audits you.


About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.

Photo Credits

  • Thinkstock/Stockbyte/Getty Images