How to Determine the Limits on Tax Deductions for Charitable Contributions

The good news about limits on tax deductions for charitable contributions is that there are no limits if your total contributions for the year are 20 percent or less of your adjusted gross income. For example, you would have no limits if you donated $20,000 of your $100,000 adjusted gross income. The amount of your deduction might be limited to either 20, 30, or 50 percent of your adjusted gross income, depending on the type of property and type of organization that receives your gift.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• IRS Forms
• Financial Calculator
• Paper And Pencils

1. Calculate your total charitable contributions for the year (add up all cash and non-cash contributions). The 50 percent limit means that the total deduction cannot be more than 50 percent of your adjusted gross income.

2. Ask a representative of the charitable organization whether it is a "50 percent limit" or "30 percent limit" group. Most organizations should be able to tell you.

3. Check Internal Revenue Service Publication 78 for the organization's tax-deductibility limits if representatives of the organization cannot give you this information.

4. Read IRS Publication 526, "Charitable Contributions," to learn how the 30 percent and 20 percent limits might restrict your contributions.

5. Note that the 20 percent and 30 percent limits might apply to gifts made to "50 percent limit" organizations, especially if the gifts are capital-gain property.

6. If you determine that one or more limits do apply, calculate your adjusted deduction using the worksheet contained in Publication 526, available online from the IRS Web site.

Tips & Warnings

• Do not assume that you can claim the same charitable deduction for all nonprofit organizations. Even qualified organizations fall under different limit rules.