Charitable Contributions And Deductions - Introduction
Individuals and businesses traditionally contribute large amounts to both public and private charities. In many cases, a charitable contribution deduction is allowed for contributions to certain qualified organizations. The deduction is taken from the adjusted gross income (AGI), so taxpayers will need to itemize deductions instead of taking the standard deduction if they want to benefit financially from a charitable contribution.
As an organization meets the requirements of the Internal Revenue Code (IRC), Section 501(c) (3) contributions to the organization are exempt from federal income tax since they meet the criteria as a "qualified charitable organization." These organizations are then classified even further as public charities or private foundations.
Individuals can deduct donations on the tax return for the year the donation was made, provided that the entity is a qualified organization. The deduction is taken directly on Schedule A of the federal tax 1040 Form. If you're in the 25% tax bracket, a qualified donation of $1,000 can reduce your tax liability by $250.