Which Contributions Are Deductible?

You can deduct outright gifts of money or property that you make to a qualified charity, or that you place in a trust for the use of the charity.

However, if you receive some benefit from the gift, you can generally only deduct the portion of the gift that exceeds the value of the benefit you receive.

Example Jim and Shirley Jackson paid $1,000 for a table at a dinner to benefit a children's aid organization. They and eight friends attended the dinner, which would have ordinarily cost $30 per person. The Jacksons can deduct $1,000 less the $300 value of the dinners, or $700.

If you purchase items at a charitable sale or auction, you can only deduct the portion of the price you paid that exceeds the value of the item.

You can generally deduct the entire membership fee or dues you pay to a qualified organization, provided that you receive only nominal benefits in exchange, such as discounts on goods and services, free parking, and free or discounted admission to the group's events, or if you receive only token items such as mugs, T-shirts, calendars, etc.

If you make a payment over $75 that is partially in exchange for some goods or services, the organization must give you a written statement that tells you the amount you can deduct.

Gifts that don't qualify for the charitable deduction:

• gifts to civic leagues, social and sports clubs (absent a showing of true donative intent), labor unions, and Chambers of Commerce
• gifts to groups run for personal profit
• gifts to groups whose purpose is to lobby for law changes
• gifts to homeowners' associations
• direct donations to needy individuals or families
• gifts to political groups or candidates for public office
• cost of raffle, bingo, or lottery tickets
• dues, fees, or bills paid to fraternal organizations, country clubs, or similar groups
• tuition
• gifts of a clothing or household item (e.g., furniture, furnishings, electronics, appliances, linens, and other similar items) by an individual, partnership or corporation if the item has minimal monetary value and is not in good used condition or better; however, if the value exceeds $500 and you have an appraisal supporting this, the deduction is permitted.

Contribution limitations. The tax deduction for an individual donor's total charitable contributions within a single tax year is generally limited to 50 percent of the donor's contribution base: adjusted gross income computed without regard to the charitable deduction and without regard to any net operating loss carryback. This means that individual donors can contribute half of their adjusted gross income to public charities such as churches, educational organizations and hospitals before the tax code limits the amount of their charitable deduction for the year.

In addition to the overall 50 percent limitation imposed on an individual donor's combined charitable contributions, additional limitations are imposed depending upon the type of donee and the type of property contributed. Contributions to public charities (e.g., churches, tax-exempt educational organizations, governmental units) of cash and of property that has not appreciated in value are deductible until they exceed 50 percent of the donor's contribution base. However, lower percentage limitations apply when donations are made to other donees, when the contribution consists of capital gain property and when contributions are made "for the use of" a donee rather than "to" the donee.

Contributions of cash and nonappreciated property to semi-public charities (i.e., war veterans' organizations, domestic fraternal societies, and nonprofit cemeteries) and to private charities are deductible until they exceed 30 percent of the donor's contribution base. However, the charitable deduction for a donor's total contributions to public charities, semi-public charities and private charities cannot exceed 50 percent of the donor's contribution base in a year. In determining whether this 50 percent limit has been reached, the donor's contributions to public charities are considered first. Therefore, if a donor contributes an amount equal to 40 percent of his contribution base to public charities, the donor's charitable deduction for contributions to semi-public and private charities cannot exceed the remaining ten percent of the donor's contribution base.

When an individual donor's charitable contribution goes over the applicable percentage limits, excess contributions can be carried forward and deducted over the five following years.

For more information, and worksheets to aid in calculating any limitations, see IRS Publication 526, Charitable Contributions.

Warning In addition to the percentage limitations on charitable contributions, the amount of allowed itemized deductions is reduced for taxpayers whose adjusted gross income (AGI) exceeds the applicable inflation-adjusted threshold. Taxpayers with AGI over a threshold amount must reduce itemized deductions by the lesser of (1) 3% of the amount of AGI above the threshold amount or (2) 80% of the allowable itemized deductions affected by this overall limit. 2014 AGI thresholds: married filing jointly—$305,050; head of household—$279,650; single—$254,200; married filing separately—$152,525. 2015 AGI thresholds: married filing jointly—$309,900; head of household—$284,050; single—$258,250; married filing separately—$154,950. Unlike the contributions made in excess of the percentage limitations, the amount that is phased-out is not carried forward and is permanently lost.

Donated services. Although you can't deduct the value of your time, you can deduct the out-of-pocket expenses you incur in donating your time and efforts to a charity. The expenses must be unreimbursed, and directly connected with the services.

If you use your car in the service of the charity, you can deduct your actual cost of gas and oil, or you can generally deduct 14 cents per mile. (This amount is set by statute and, unlike other mileage rates, it is not indexed for inflation.) You can deduct tolls and parking whether you use the standard mileage rate or actual costs. However, you'll have to keep written records of the mileage you drive, the name of the charity and the purpose for which you drove, and the records should be made at or near the time you actually did the driving. If you use your car for a significant amount of charitable driving, it may make sense to use the actual cost method.

You can deduct travel expenses, including meals and lodging, if you travel away from home to perform services for a charity, or if you are a chosen representative of a qualified organization at a convention. However, you can't deduct travel expenses if you attend a convention only as a member, rather than a chosen representative. In any case, you can't deduct the costs of bringing your spouse or dependents along, and you can't deduct costs of sightseeing, parties, etc.

Foster parents can deduct any expenses for caring for their foster children that exceed the nontaxable payments they received (if any). If you host a foreign exchange student under an agreement with a qualified organization, you can deduct up to $50 for each month or half-month that the student lives with you.

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