Tax-Deductible Donations: Rules for Charitable Contributions

To get a tax deduction on your charitable contribution to an IRS-qualified 501(c)(3) public charity, you need to itemize your deductions. This means to list down all your tax deductions, expecting their total will be more than the standard deduction. The most common expenses that qualify for tax deduction are state and local taxes, charitable giving, mortgage interest, and medical and dental expenses.

When you donate a minimum of 0.5% of your adjusted gross income to a qualified organization, when donating cash, you can deduct up to 60% of your AGI. Additionally, if you hold your appreciated assets for more than a year, at fair market value, you can deduct up to 30% of your AGI. Further, combining more than one asset type can offer you more tax benefits by increasing the charitable tax deduction.

The Pease limitation from the tax code has been removed by the Tax Cuts and Jobs Act of 2017. It was an overall tax reduction on itemized deductions for taxpayers with higher incomes. The rule decreases the value of the itemized deduction by 3% of the taxpayer on their AGI over a certain threshold. It continues till it phases out 80% of the value of the itemized deduction of the taxpayer.

Yes, you can take a fair market value deduction for donating private S-corp or C-corp stocks to charity. For this, you need to donate highly appreciated investments to a DAF or other public organization. Here, while subtracting the capital gains tax on the appreciation and distribution, you can claim a fair market value tax deduction for the donation determined by a qualified appraisal.

Yes, donations made to qualified churches and religious organizations are tax-deductible. However, to claim the deduction, when filing your taxes, you need to have a proper bank statement and receipts as evidence on your side.