What Is a Qualified Charitable Contribution? What Are the Requirements for a Qualified Charitable Distribution?
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.
Contributions That Benefit You
If you receive a benefit in exchange for a charitable contribution, the deduction is reduced by the value of the benefit received.
Example: Paul made a $70 donation to Public TV and received a $40 CD of his all-time favorite band, the Herman’s Hermits, in appreciation for his donation. His deduction equals $30.
Athletic Tickets. No deduction is allowed for amounts paid to (or for the benefit of) a college or university in exchange for athletic event tickets or seating rights.
State Or Local Credit. No deduction is allowed for the portion of a charitable contribution from which you receive or expect to receive a credit against state or local taxes.
Charitable Benefit Event Ticket. The deduction equals the ticket price, minus the value of the right to attend the event. This is true even if you did not actually attend the event. However, if the ticket is returned to the qualified charity for resale, the entire cost of the ticket is deductible.
Charitable Contribution Deduction Limitations
100% AGI Limit. Qualified contributions to certain disaster relief efforts are limited to 100% of AGI by election. Carryover amounts are subject to the 60% AGI limit.
60% AGI Limit. Cash contributions to public charities and certain other organizations are limited to 60% of AGI. The 60% limit does not apply to noncash charitable contributions, which are limited to 50% of AGI.
Example: Bill gave his church a $200 cash contribution (60% AGI limit) and also donated clothing with a FMV of $300 (50% AGI limit).
30% AGI Limit. The 30% AGI limit applies to:
- Donations to organizations that are not public charities, such as veterans’ organizations, fraternal societies, nonprofit cemeteries, and certain private foundations. • Donation of property that is used by a charity, other than capital gain property donated to a non-public charity.
- Cash contributions for the use of (held in trust) a public charity instead of to the charity.
- Deduction for student living expenses.
- Certain capital gain property contributions to public charities. However, can elect to apply the 50% AGI limit.
Note: For 2021, the 60% of AGI limit has been increased to 100% of AGI.
20% Limit. The 20% AGI limit applies to noncash contributions of capital gain property to non-public charities, or for the use of, any qualified organization.
Standard Deduction. If you do not itemize, you can take a charitable deduction of up to $300 ($600 MFJ) for cash contributions made in 2021 to qualified organizations.
State Or Local Credit For Charitable Contribution Limit. The federal charitable contribution deduction is limited to the extent you receive or expect to receive a corresponding state or local tax credit for that contribution.
Example: In 2021, Andy makes a charitable contribution of $1,000 to the state of New York receiving a state tax credit of 70% of the amount contributed ($700). Andy’s federal charitable contribution deduction may not exceed $300.
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 More Than $500
A vehicle donation with a claimed fair market value (FMV) more than $500 is limited.
1) If the organization sells the donated vehicle without a significant intervening use of 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 a significant intervening use of or material improvement to the vehicle, the deduction is limited to its FMV.
3) If the organization gives or sells the vehicle at well below FMV to a needy individual in line with the purpose of the charity to provide transportation to the poor, the deduction is limited to FMV.
Donation $500 Or Less
A written acknowledgement is still required if the contribution is $250 or more. If the organization sells the vehicle without any significant intervening use of or material improvement for $500 or less, the deduction is equal to the lesser of $500, or FMV.
Example: Jack donates his car, worth $800, to a charity that sells it for $400 without any significant intervening use or material improvements. Jack can deduct $500 as a charitable contribution. 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.