Charitable Contributions Deductions IRS 2024: All You Need to Know

Charitable contributions are a way to support your community by donating money and goods without any interest.  Many organizations depend on these cash and noncash donations to do welfare work. You can deduct charitable donations in the US to minimize your taxable income. However, there are some regulations you must follow, like giving donations to qualified organizations, setting contribution limits, and determining how to claim. In this article, we will provide you with a complete brief about the process of charitable contributions deductions.

Which Organizations Can Qualify to Receive Deductible Contributions?

The IRS recognizes a qualified organization as eligible to receive tax-deductible contributions.  You can ask them if an organization qualifies, or you can simply visit the IRS website, where you can use their online tool to search for qualified organizations. Here is the list of qualified organizations:

1. Community Chest, Trusts, and Foundations
2. Religious Organizations
3. Nonprofit Charitable Organizations
4. Educational Organizations
5. Hospitals and Medical Research Organizations
6. Utility Company Emergency Programs
7. Volunteer Fire Companies and Civil Defense Organizations
8. Public Parks and Recreation Programs

Exceptional Cases: Foreign Charities

In some cases, contributions to foreign organizations may also be deductible. But there are some rules.

Canadian Charities

Donations to specific Canadian charitable organizations may be deductible under the U.S-Canada income tax treaty. However, this is only allowed if you have income from Canadian sources. You can check the IRS Publication 597 to know more about the US-Canada Income Tax Treaty.

Mexican Charities

Charitable donations to Mexicans can also be deductible under the US-Mexican income tax treaty. But your source of income should be from Mexican. The same deduction limits apply to U.S.-based donations as these foreign contributions.

Which Contributions Can You Deduct?

You can generally deduct contributions of money or property to qualified organizations. However, there are criteria, and your contributions should fall under these. First, the contribution must be for the organization’s use, not set aside for a specific person. In most cases, you can deduct over 60% of your adjusted gross income (AGI).

What Qualifies as a Deductible Contribution?

Cash Donations: These can qualify for deductible contributions. The excess might be deductible even if you pay more than the fair market value (FMV) for something from a deductible. For example, if you spend $65 for a $25 dinner ticket at a church, you can deduct $40 as a charitable contribution.

Property Donations: When you donate property, you can usually deduct its fair market value at the time of contribution. But make sure you’re giving it to a qualified organization.

Membership Fees(sometimes): You can also deduct membership fees or dues paid to qualified organizations. But only the amount that exceeds the value of benefits you receive.

What About Volunteering?

While you can’t deduct the value of your time or services, you can deduct some out-of-pocket expenses related to volunteering. These include:

• Unreimbursed travel expenses (like gas and oil for your car)
• Uniform costs (if required and not suitable for everyday use)
• Other expenses directly connected to the services you’re providing

Special Cases to Consider

1. Hosting a Student: If you’re hosting a student as part of an educational program, deduct up to $50 monthly in expenses.
2. Foster Parents: Some unreimbursed expenses for foster care might be deductible if you’re not profiting from the arrangement.
3. Whaling Captains: Whaling captains can deduct up to $10,000 yearly for whaling expenses.

Which Contributions You Can’t Deduct?

Here is a list of contributions you can’t deduct:

1. Donations to specific individuals
2. Contributions to non-qualified organizations
3. The value of your time or services
4. Personal expenses
5. Qualified charitable distributions from IRAs
6. AppraisaSpecificCertain contributions to donor-advised funds
7. Some partial interest property contributions

Which are Non-Qualified Organizations?

1. State bar associations
2. Chambers of commerce
3. Civic leagues and associations
4. Country clubs and social clubs
5. Foreign organizations (with some Canadian, Israeli, and Mexican exceptions)
6. Homeowners’ associations
7. Labor unions
8. Political organizations and candidates

When Do You Benefit from Your Contribution?

• College contributions in exchange for athletic event tickets
• Contributions that give you a state or local tax credit (with some exceptions)
• Lobbying contributions
• Retirement home payments for room and board
• Raffle or lottery tickets
• Tuition payments (even for parochial schools)

When to Deduct Contributions?

The first thing you must remember when deducting contributions is that you can only deduct donations in the year you make them.

• Credit Card Deduction is included for the year you charge it.
• Pay-by-Phone Deduct when the bank pays, not when you set it up.
• Stock Gifts: When you mail a stock gift, deduct it on the mailing date. If transferring money is required, it is deducted when the transfer is complete.
• Promissory Notes and Options Deduct only when you make payment when the charity uses the option.
• Borrowed Money Deducted when you give the money to charity, not repay your loan.

What is the Limit on Deductions?

Your cash contributions are generally limited to 60% of your Adjusted Gross Income (AGI). The type of organization you’re giving to matters. Some charities fall into the “50% limit organizations” category. These include churches, educational institutions, and hospitals, among others.

Different Limits for Different Donations

• Cash to 50% limit organizations: 60% of AGI
• Noncash to 50% limit organizations: 50% of AGI
• Some contributions: 30% Certain capital gain property: 20% of AGI

How To Figure Your Deduction When Limits Apply?

Calculating your charitable deductions can seem complex. But, break it down in easy steps here:

Cash Contributions: You can deduct up to 60% of your adjusted gross income (AGI) for cash donations.

Noncash Donations: Noncash contributions, like goods or property, are limited to 50% of your AGI, reduced by any cash contributions already deducted.

The 30% Rule: Some contributions are capped at 30% of your AGI or 50% minus prior deductions—whichever is less.

Capital Gain Property: For donations of capital gain property, the deduction limit is 30% of your AGI, or 50% minus other deductions.

Capital Gain Property Election: Yopt to apply the 50% limit to capital gain property. But you’ll need to reduce the fair market value by the appreciated amount.

How to Claim Charitable Contribution Deductions?

To deduct a charitable contribution, you must itemize deductions on Schedule A (Form 1040). Your deduction may be limited by specific rules and limits outlined in this publication.

If you have donated property of 5000$ or less, fill out the IRS form 8283 section A. For deductions over $5,000, you must complete Section B of Form 8283 for each item or group of similar non-cash items. The organization that received the complete out and signed Part V of Section B on Form 8283.

BusAcTa Is Making Charitable Contributions Deductions Easy

Making charitable contributions is a great way to help your community. But do you want to maximize your charitable contribution deductions this year? BusAcTa Advisors is here to guide you in this kind of act. Our team of experts will guide you through the IRS rules and ensure you’re getting the most out of your donations. Get your personalized tax advice, and let us do it for you from start to end. Contact us today and get the most out of your charitable giving.