Charitable Contribution Flashcards
Overall 60% and 50% Limitations
The maximum income tax deduction for charitable contributions that is available for any tax year is subject to certain limitations. For individuals, the general overall limitation applicable to public charities is 50% of the taxpayer’s AGI for the year. However, cash contributions are allowed a limit of 60% of the donor’s AGI. Any contributions in excess of the overall limitation may be carried forward and deducted in the subsequent five tax years.
30% Limitation
A 30% AGI limitation rule applies under certain circumstances. Contributions of capital gain property to public charities are generally valued at the property’s FMV but are subject to an overall limit of 30% of AGI instead of a 50% limit.
Appreciated long-term capital gain property such as securities that are held for more than 1 year and are donated to public charities can be deducted at a fair market value up to 30% of the donor’s AGI, or the adjusted basis amount can be deducted up to 50% of the taxpayer’s AGI.
Tangible personal property that is use-related, meaning the charity can actually use the property that that was held by the donor for more than 1 year can receive a deduction for fair market value up to 30% of the donor’s AGI. Or the donor can elect to deduct the basis of the property up to 50% of AGI.
20% Limitation
Income tax deductions for contributions of long-term capital gain property to private non-operating foundations are more limited than for donations made to qualified public charities. For donors who itemize deductions, the deduction made to a private foundation is limited to the adjusted basis of the property if the donor elects to use 30% of AGI or 20% of AGI if the fair market value is used for the gifted long-term capital gain property. The income tax deduction is reduced by any contributions of capital gain property donated to a public charity.
Contributions with Benefits Received
A charitable income tax deduction is allowed to the extent that the value of the transfer exceeds any value received by the donor. For example: If a taxpayer pays $5.00 for a box of Girl Scout cookies, and a comparable box of cookies at the grocery store costs $3.00, the taxpayer has made a charitable contribution of the difference, in this case $2.00.
