Charitable Organizations
Qualified charitable organizations include nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals.
Examples of Qualified and Nonqualified Organizations
Qualified Nonqualified
• Churches, mosques, temples, synagogues.
• Boy and Girl Scouts, Boys and Girls Clubs of America, Red Cross, Goodwill, Salvation Army, United Way.
• Fraternal orders, if gifts used for qualified charitable purposes.
• Veterans’ and certain cultural groups.
• Nonprofit schools, colleges, museums, hospitals, and organizations trying to find medical cures.
• Federal, state, and local governments, if gifts are solely for public purposes, including nonprofit volunteer fire departments, and public parks facilities.
• Country clubs, lodges, fraternal orders, and similar groups, unless they are a qualified charity.
• Civic leagues, social and sports clubs, labor unions and chambers of commerce.
• Political organizations and candidates.
• Communist organizations.[IRC §170(k)]
• Foreign organizations.
Exceptions: Contributions to certain Canadian, Israeli, and Mexican charities are deductible. See IRS Pub. 526.
• Homeowner’s association
Contributions That Benefit the Taxpayer
If used items were given to charity, such as clothing or furniture, the fair market value of the items is used to determine the deductible amount. Fair market value is what a willing buyer would pay a willing seller when neither has to buy or sell and both are aware of the conditions of the sale. Charitable Contribution Deduction Limitation Suspension of limitations for disaster relief. The AGI limitations do not apply to qualified contributions for relief efforts in disaster areas. However, certain limits
may apply if your qualified contributions are more than your AGI minus all other allowable contributions. 60% limitation. Beginning in 2018, the percentage AGI limitation for charitable contributions by an individual of cash to public charities and certain other organizations is increased from 50% to 60%. 30% limitation. The 30% AGI limitation applies to the following:
• Donations to organizations that are not 60% limit organizations, such as veteran’s organizations, fraternal societies, nonprofit cemeteries, and certain private non-operating foundations.
• Donation of property that is used by a charity, other than capital gain property donated to a non-60% limit organization.
• Deduction for student living expenses. 20% limitation. The AGI limitation applies to all donations of capital gain property to, or for the use of, a charity that is not a 60% limit organization.
Charitable Contributions
Deductible as Charitable Contributions:
• Cash, check, or money
order given to a qualified
charitable organization.
• Property other than cash or
check given to a qualified
charitable organization.
• Out-of-pocket expenses
when serving a qualified
organization as a volunteer.
• Automobile expenses
when serving a qualified
organization as a volunteer.
• Limited portion of expenses
paid for a student living with
the taxpayer under a written
agreement, sponsored
by a qualified charitable
organization.
• Charity volunteer’s travel
expenses away from home,
including meals/lodging
if there is no significant
level of personal pleasure,
recreation, or vacation in
the travel.
Nondeductible as
Charitable Contributions
• Contribution to a nonqualified
charitable organization.
• Political contributions.
• The value of a taxpayer’s time or
services.
• Gifts to an individual.
• Donations to organizations engaged
in lobbying, for law changes, or for the
taxpayer’s trade or business.
• Tuition at a school that is a qualified
charity (but may qualify for education
tax benefits).
• The cost of raffle, bingo, or lottery
tickets (but may qualify as a gambling
loss).
• The value of blood given to a blood
bank.
• Adoption expenses.
• Contributions of $250 or more if
acknowledgement statement is not
retained.
• The transfer of a future interest in
tangible personal property.
• The amount of contribution where a
benefit was received in exchange.
• Certain contributions to donor-advised
funds.
Donating a Vehicle
Written Acknowledgement
Obtain written acknowledgement from the organization,
which includes details on the use or disposition of the
vehicle by the donee organization. A copy of the written
acknowledgement must be attached to the tax return.
Deduction Limits
The deduction limit for vehicles may be less than fair
market value under the gross proceeds deduction limit.
1) If the organization sells the donated vehicle without a
significant intervening use or material improvement
by the donee organization, then the deduction is limited
to the gross proceeds received from the sale.
2) If the organization sells the donated vehicle after significant
intervening use or material improvement to
the vehicle, the deduction is limited to the fair market
value of the vehicle.
3) If the organization sells the vehicle at significantly below
fair market value, the gross proceeds limitation
will not apply if it was a gratuitous transfer to a needy
individual in line with the purpose of the charity to
provide transportation to the poor.
Contributions of Less Than $500
A written acknowledgement is still required if the contribution
is $250 or more. If the organization sells the
vehicle without any significant intervening use or material
improvement, and the sale yields gross proceeds of
$500 or less, the deduction is equal to the lesser of fair
market value or $500.
Example: Jack donates his car, worth $800, to a charity that
turns around and sells it for $400 without any significant intervening
use or without making any material improvements.
Jack can deduct $500 as a charitable contribution for the donation
of his car. Because his deduction is $250 or more, he still
needs a written acknowledgement from the charity, but the acknowledgement
is not required to be attached to his return.
Contributions of Property
If used items were given to charity, such as clothing or
furniture, the fair market value of the items is used to
determine the deductible amount. Fair market value is
what a willing buyer would pay a willing seller when
neither has to buy or sell and both are aware of the conditions
of the sale.
Charitable Contribution Deduction Limitation
Suspension of limitations for disaster relief. The AGI
limitations do not apply to qualified contributions for
relief efforts in disaster areas. However, certain limits
may apply if your qualified contributions are more than
your AGI minus all other allowable contributions.
60% limitation. Beginning in 2018, the percentage AGI
limitation for charitable contributions by an individual
of cash to public charities and certain other organizations
is increased from 50% to 60%.
30% limitation. The 30% AGI limitation applies to the
following:
• Donations to organizations that are not 60% limit organizations,
such as veteran’s organizations, fraternal
societies, nonprofit cemeteries, and certain private
non-operating foundations.
• Donation of property that is used by a charity, other
than capital gain property donated to a non-60% limit
organization.
• Deduction for student living expenses.
20% limitation. The AGI limitation applies to all donations
of capital gain property to, or for the use of, a charity
that is not a 60% limit organization.
