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Charity and Tax 101: Charitable Contributions Deduction

Individual taxpayers can deduct up to 60% of the adjusted gross income when donating to a qualified organization.
Individual taxpayers can deduct up to 60% of the adjusted gross income when donating to a qualified organization. (Photo: Brady Martz)

Charitable contributions deduction refers to the reduction of taxable income when individual taxpayers and businesses donate to qualified charitable organizations.

Generally, an individual taxpayer can deduct up to 60% of the adjusted gross income when donating to a qualified organization. Corporations can deduct up to 25% of their taxable income. explained that qualified contributions are limited depending on the contribution type and contribution. The limit can be either 20%, 30%, or 50%, and any contribution exceeding the limit can be deducted on the next tax return through a carryover process.

Also Read: 5 Ways to Avoid Paying Taxes “Legally”

Difference Between Standard Deduction and Itemized Deduction | H&R Block

Qualified Organizations

The following organizations are certified by the Inland Revenue Service as qualified organizations for charitable contributions deduction:

  • A federal or state position (or political subdivision), or the District of Columbia or the United States, if made exclusively for public purposes;
  • A community chest, trust, corporation, or foundation organized, created, or its possessions is under the states’ laws, the District of Columbia, or other United States territory. It should be organized and operated exclusively for religious, educational, charitable, scientific, or literary purposes;
  • A religious organization;
  • A war veterans’ organization or its post, trust, auxiliary, or foundation is organized in the United States;
  • A civil defense organization created under local, state, or federal law – that includes unreimbursed expenses of civil defense volunteers that directly connect to their volunteer services;
  • A domestic fraternal society operating under the lodge system, but only if the contributions are exclusively for charitable purposes;
  • A nonprofit cemetery company – if the funds are exclusively used for the perpetual care of the cemetery as a whole and not for a specific lot or mausoleum crypt;

See: When is IRS Accepting Tax Returns 2022? Credits and Deductions Unveiled! 

More: 2023 Home Business Tax Deductions That Can Save You Money, Here’s What You Need To Know. 

2023 Charitable Contributions Deduction Rules

Marca reports taxpayers should itemize all the deductions by filling out Schedule A to claim tax-deductible donations to charity. Taxpayers should not know that itemizing might take longer and create a higher bill for the tax preparers or require more expensive tax software.

If you want to donate, you can visit the IRS Exempt Organizations Select Check tool to see if the organization is qualified. You can also ask the organization or charity how much of your contributions will be tax-deductible.

Read More: Tax Credits and Deductions for Homeowners 2022 Tax Return


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