A charity is a nonprofit organization that devotes all its resources to its own charitable activities—most commonly education, promotion of health, relief of poverty or distress, or religious purposes. None of its income may be for the personal benefit of any member or trustee of the organization. Charities are exempt from federal income tax under Section 501(c)(3) of the IRS code, and can receive tax-deductible gifts.
The IRS code on tax deductible giving limits the amount that is deductible for annual contributions based upon your adjusted gross income. There may be certain situations where modified adjusted gross income may take precedence. If you exceed the annual limitations, the excess deduction can generally be carried forward for up to five years. Your annual charitable contributions for the year can be totally deductible if they’re under 20% of your adjusted gross income. Any excess gifts greater than 20% of your adjusted gross income, the tax deduction limitations based the type of personal property gifted and the type of charitable organization receiving the gift. However the total tax deduction can’t exceed 50% of your adjusted gross income for the year.
The 50% limit applies to contributions to public charities like most churches, hospitals alike. If the gift is of capital gain property and the deduction is taken for the fair market value, in which case a 30% limit will apply, but there may be an exception to this. See your tax consultant before moving forward with your tax return. The 50% limit is available for gifts of capital gain property if the deduction is limited to the cost basis of the asset. The 30% limit applies to gifts for the use of any charitable organization and gifts (other than capital gain property) to non-50% type charities. The 20% limit applies to gifts of capital gain property to non-50% type charities. A donor’s deduction for gifts of patents and other intellectual property is limited to the lesser of the taxpayer’s basis or the fair market value of the property. An additional deduction may be available for a limited number of future years if the donor organization realizes income from the gifted property and certain requirements are met. This press release contains content from Light Bulb Press with permission.