If you Set it too Low
This is where things take a turn into more complicated territory. This article won’t get into the nitty-gritty details of the IRS’s exhaustive rules on this subject — if you’re a whaling captain, for example, you’ll want to look elsewhere for an explanation of the charitable deductions you can take for subsistence bowhead whale hunting activities. The answers are all to be found in the IRS publications on charitable deductions, but you might need some time (or professional help) to find them. Whatever you do, if you’ve made charitable contributions over the year, you must take the itemized deduction option and fill out Schedule A on your federal Form 1040. If you take the standard deduction you won’t get the full benefit of your donations. Some of it will be fully deductible, some partially, some not deductible at all.
Personal expenses are on the no-fly list, as well. In addition to the restrictions on what kinds of charitable deductions you can take, there are limits on how much you can deduct every year. And if you incurred appraisal fees in the process of donating an item that was worth more than $500, you can’t deduct those fees. There aren’t too many people who donate very large chunks of their income to charity every year, but if you do, there are limits on what you can deduct. On the next page, we’ll tell you about those limits.
That’s only the tip of the iceberg. If there were expenses associated with your volunteering, you can write those off, but not your time. If you receive a benefit from the donation that’s equal or greater in value to the donation – for example, receiving $200 tickets in return for a donation of $200 – you can’t deduct any part of that $200. You also can’t deduct the value of your time or services, even if you volunteered with a qualified organization.
Charitable tax deductions are the IRS’s way of rewarding you for making donations to organizations that help people in need. Cash, check and credit card donations are the most straightforward type of donation — they’re easy write-offs. But you can also donate property, goods, real estate, your time and services, stock options, intellectual property and just about anything else you can think of. For every contribution you make (cash or otherwise) to a qualified charity, you can shave a little (or a lot) off your adjusted gross income and reduce your own tax burden. Charitable contributions can take many forms.
Publication 1771 explains the requirements for documenting and disclosing the donations. Are charitable contributions deductible in 2020? You can typically only deduct donations totaling up to 60 percent of your AGI. That donation can be limited to a percentage, though, if it totals more than your adjusted gross income (AGI). Generally, you can deduct 100 percent of a charitable donation. How much of a donation is tax deductible? Yes, charitable contributions are deductible for the 2020 tax year. Can I deduct charitable contributions in 2020 if I don’t itemize?
Not all charitable donations are considered equal in the eyes of the IRS. Lest you’re planning to donate to charities and deduct willy-nilly, there are restrictions that govern the process. As we mentioned before, the donation must be given to a qualified organization — always check before you donate. Examples of nonqualified organizations include labor unions, political interest groups and candidates, country clubs, homeowners’ associations, Communist groups, chambers of commerce, and foreign groups (but, thanks to trade agreements with Canada, Mexico and Israel, certain organizations in those countries might be OK). On the next page, we’ll tell you what you can’t deduct.
