Charitable Contributions

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Discussion
One of the most commonly used type of itemized deduction available to taxpayers is the charitable contribution. The deduction is also available to corporations though the calculation of the deductible amount differs. This post will focus on the tax consequences of making charitable contributions as an individual during 2017. A charitable deduction may be made in either cash or property and must be to one of the following types of organizations (from Publication 526):

1. Churches, synagogues, temples, mosques, and other religious organizations
2. Federal, state, and local governments, if your contribution is solely for public purposes (for example, a gift to reduce the public debt or maintain a public park)
3. Nonprofit schools and hospitals
4. The Salvation Army, American Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts of America, Girl Scouts of America, Boys and Girls Clubs of America, etc.
5. War veterans' groups

The deduction of charitable contributions is typically limited to 50% of a taxpayer's adjusted gross income (AGI). Organizations qualifying for the 50% deduction include:

1. Churches;
2. Schools;
3. Hospitals & medical research organizations;
4. Organizations that manage funds for the benefit of colleges and universities;
5. The United States or any of the states/territories;
6. Publicly supported charities;
7. Organizations that don't qualify as "publicly supported" but meet other criteria;
8. Organizations operated for the benefit of any of the above listed organizations;
9. Private operating foundations;
10. Private non operating foundations that make qualifying distributions equal to 100% of their contributions; and
11. Private foundations whose contributions are pooled into a common fund that make qualifying distributions equal to 100% of their contributions.

Verifying that the charitable organization has a 501(c)(3) designation is an easy way to ensure that any amounts paid to the organization will be tax deductible (50% AGI limit). A 30% limitation applies to donations to the following organizations (from Publication 526):

1. Contributions to all qualified organizations other than 50% limit organizations. This includes contributions to veterans' organizations, fraternal societies, nonprofit cemeteries, and certain private nonoperating foundations.
2. Contributions for the use of any qualified organization

The 30% of AGI limit also applies to contributions of capital gain property to 50% limit organizations. A 20% of AGI limit applies to contributions of capital gain property to 30% limit organizations. The 50% limitation might be lifted in the case of a disaster area contribution. Note that all itemized deductions will be limited if a taxpayer's income exceeds certain levels (from Publication 526):

1. $156,900 if married filing separately,
2. $261,500 if single,
3. $287,650 if head of household, or
4. $313,800 if married filing jointly or qualifying widow(er).

It's also important to be aware of the fact that charitable contributions will not provide a benefit to the taxpayer unless the itemized deductions of the taxpayer exceeds the standard deduction for the year which will be increasingly difficult in 2018 when it is effectively doubled.

References
https://www.irs.gov/pub/irs-pdf/p526.pdf
https://www.law.cornell.edu/uscode/text/26/170

Disclaimer
Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.