What Is a Charitable Contributions Deduction?
The charitable contributions deduction reduces taxable income by allowing individual taxpayers and businesses to deduct contributions of cash and property to qualified charitable organizations. The amount that can be deducted in a year is subject to limits that depend on the type of donation and how you file your taxes.
- The charitable contributions deduction allows taxpayers to deduct contributions of cash and property to qualified charitable organizations.
- There are annual caps that limit the total amount of charitable contribution deductions.
- In 2020 and 2021 the annual cap has been raised for cash contributions.
- Taxpayers who do not itemize deductions can deduct up to $300 of cash contributions in addition to claiming the standard deduction in 2020 and 2021.
How the Charitable Contributions Deduction Works
Donations made to a qualified charity are deductible for taxpayers who itemize their deductions, within certain limitations. Typically for cash contributions made between 2018 and 2025, the amount that can be deducted is limited to no more than 60% of the taxpayer’s adjusted gross income (AGI). For tax years 2020 (thanks to the CARES Act) and 2021 (thanks to the Consolidated Appropriations Act) the 60% AGI limit was raised to 100%.
Other types of contributions can be limited to 50%, 30%, or 20% of your AGI, depending on the type of property and organization receiving your donation. For example, capital gains property donations, such as appreciated stock, are limited to 30% of your AGI.
Under the CARES Act, taxpayers who do not itemize their deductions and take the standard deduction instead are also allowed up to a $300 deduction for charitable contributions in 2020. The Consolidated Appropriations Act extended this deduction to 2021. Married couples filing jointly who don't itemize can deduct up to $600 of donations in 2021.
Charitable contributions for taxpayers who itemize their deductions must be listed on Schedule A of Form 1040. Taxpayers who do not itemize deductions can deduct up to $300 for the 2020 and 2021 tax years—for 2020 it was permitted as an "above-the-line" deduction.
If you cannot deduct all of your charitable donations in a year because you have hit the percentage limit, you can carry them forward for up to five years. After that they expire and you can no longer use them.
Charities That Qualify
In order to deduct charitable contributions, the recipient charity must be a qualified organization in the eyes of the IRS. According to the IRS, acceptable charities include:
- A trust, community chest, or foundation created in the United States that is operated exclusively for scientific, religious, charitable, or literary purposes
- A U.S. organization developed to prevent cruelty to animals or children
- A synagogue, mosque, church, or other religious organization
- A volunteer, not-for-profit fire company
- A veterans of war organization
- A civil defense organization created under local, state, or federal law, including any unreimbursed expenses of civil defense volunteers that are directly connected to their volunteer services
- A domestic fraternal society that functions under a lodge system, but the donation is only deductible if it is used for community outreach or other charitable purposes
- A nonprofit cemetery, but only if the funds are used to care for the cemetery as a whole versus a particular tombstone, mausoleum, crypt, or other marker
To determine whether an organization qualifies to receive deductible contributions, the IRS Tax Exempt Organization Search tool can help verify its tax-exempt status and eligibility.
If you plan to claim deductions for your charitable contributions, you’ll need to keep a record of each donation. For any cash donation of more than $250, the IRS requires written confirmation of the gift from the donee that cites the amount donated, the date, and the name of the organization. For donations that are less than $250, the IRS requires that you keep canceled checks or other records.
Property donated to a qualified charitable organization can be deducted at fair market value. Like a cash donation, you will need written confirmation from the organization. If you donate property that is worth more than $5,000—for example, a car—it will require an appraisal that affirms its value.
What Is the Charitable Donations Deduction Limit?
For taxpayers who itemize their deductions, the limit for cash donations in 2021 is 100% of gross adjusted income (AGI). For donations of property, the deduction limit is 50%, 30%, or 20% of your AGI, depending on the type of property donated.
Can You Take Charitable Donation Deductions Without Itemizing?
Taxpayers who take the standard deduction instead of itemizing deductions are allowed to deduct up to $300 for charitable contributions in 2021. Married couples filing jointly can deduct up to $600.
What Is a Qualified Charitable Organization?
The IRS recognizes donations to organizations that qualify as 501(c)(3) organizations as tax-deductible for donors. Three common categories are charitable organizations, churches and religious organizations, and private foundations.