Charitable contributions are donations of cash or other property to a qualified organization. For U.S. federal tax purposes, a qualified organization includes any organization described in IRC Section 170(c)1, which are generally charitable organizations exempt from taxes under Section 501(c)(3) of the Internal Revenue Code (IRC).
Individual taxpayers are generally entitled to an itemized tax deduction for charitable contributions. Taxpayers report itemized deductions on Schedule A (Itemized Deductions) of their Form 1040 (US Individual Income Tax Return). Any contributions of noncash property generally must also be reported on Form 8283 (Noncash Charitable Contributions).
The deduction amount, however, may be limited depending on the type of property contributed (e.g., cash, noncash property, appreciated capital gain property) and the type of charitable organization receiving the donation.
Qualified Organizations Under IRC Section 170(c)
- A state or United States possession (or political subdivision thereof), or the United States or the District of Columbia, if made exclusively for public purposes;
- A community chest, corporation, trust, fund, or foundation, organized or created in the United States or its possessions, or under the laws of the United States, any state, the District of Columbia or any possession of the United States, and organized and operated exclusively for charitable, religious, educational, scientific, or literary purposes, or for the prevention of cruelty to children or animals;
- A church, synagogue, or other religious organization;
- A war veterans’ organization or its post, auxiliary, trust, or foundation organized in the United States or its possessions;
- A nonprofit volunteer fire company;
- A civil defense organization created under federal, state, or local law (this includes unreimbursed expenses of civil defense volunteers that are directly connected with and solely attributable to their volunteer services);
- A domestic fraternal society operating under the lodge system, but only if the contribution is to be used exclusively for charitable purposes;
- A nonprofit cemetery company where funds are irrevocably dedicated to the perpetual care of the cemetery as a whole and not a particular lot or mausoleum crypt.
Limits on Deductions for Individuals
In general, the charitable deduction is limited to a certain percentage of a taxpayer’s Adjusted Gross Income (AGI). The maximum deductible amount is 60% of AGI, and the deduction may be further limited to 50%, 30%, or 20% of AGI.
60% AGI Limitation – First Category of Qualified Organizations
A taxpayer can generally deduct cash donations up to 60% of their AGI for contributions to churches, educational organizations, hospitals, medical research organizations, publicly supported charities, and private operating foundations.
The deduction limit has historically been 50% for cash donations, however, the limit was temporarily increased to 60% for cash donations made between December 31, 2017 and January 1, 2026. After January 1, 2026, the limitation reverts back to 50% unless extended by congress.
In limited cases, cash contributions to private nonoperating foundations will qualify for this upper limit if the nonoperating foundation distributes all of its contributions received in any year.
Example 60% Deduction Limit
John’s AGI for 2023 is $125,000. In December 2023, John donated $80,000 cash to the St. Jude Children’s Research Hospital. John’s charitable deduction on Schedule A is limited to $75,000 (60% times $125,000). John can carry forward the remaining $5,000 to the 2024 tax year.
50% AGI Limitation – First Category of Qualified Organizations
A taxpayer can deduct noncash donations of property up to 50% of their AGI for contributions to the charitable organizations listed above. If the taxpayer donates appreciated capital gain property (e.g., appreciated publicly traded stocks), the deduction is limited to 30% of AGI if the taxpayer figures their deduction using the property FMV and not the cost basis.
Example 50% Deduction Limit
Jane’s AGI for 2023 is $85,000. In December 2023, Jane donated used clothes to the Goodwill. The clothes are in excellent condition, and Jane originally paid $1,900 for the clothes. Jane estimates the FMV is now $600 and gets a receipt from Goodwill. Jane’s charitable deduction on Schedule A for noncash property is limited to $42,500 (50% times $85,000). Jane’s charitable contribution of $600 is allowed in full because it is less than the AGI limit of $42,500. Jane also reports the $600 contribution on Form 8283.
Visit our YouTube channel for a video tutorial on completing Form 8283 for the donation of used clothes to a public charity.
30% AGI Limitation – Second Category of Qualified Organizations
A taxpayer can deduct cash or noncash contributions of property up to 30% of their AGI for donations to organizations other than those listed in the 50% category, which is most often a contribution to a private nonoperating foundation. If the noncash property is appreciated capital gain property, there is a 20% AGI limit.
Example 30% Deduction Limit
Jane is a wealthy individual who formed her own private nonoperating foundation. During 2023, Jane’s AGI was $500,000, and she contributed $160,000 cash to her private foundation. Jane’s charitable deduction on Schedule A is limited to $150,000 (30% times $500,000). Jane can carry forward the $10,000 to the 2024 tax year.
20% AGI Limitation – Second Category of Qualified Organization
A taxpayer can deduct noncash contributions of appreciated capital gain property up to 20% of their AGI for donations to organizations other than those listed in the 50% category, which is most often a contribution to a private nonoperating foundation.
Example 20% Deduction Limit
Adam is a wealthy individual who formed his own private nonoperating foundation. In 2023, Adam’s AGI was $1,000,000. In December 2023, he donated 700 shares of Berkshire Hathaway Inc (Class B) to his private foundation. The shares were worth $250,000 on the date of donation. Adam purchased the shares in November 2020 for $147,000, so his unrealized long-term capital gain was $103,000 (250,000 – 147,000). Adam can deduct the $250,000 FMV of the shares as a charitable deduction on Schedule A. However, Adam’s charitable deduction for 2023 is limited to $200,000 (20% times $1,000,000). Adam can carry forward the nondeductible $50,000 to the 2024 tax year.
Visit our YouTube channel for a video tutorial on completing Form 8283 for the donation of publicly traded stocks to a private nonoperating foundation.
More Information and Resources
Taxpayers can find more information related to charitable contributions in the IRS Publication 526 (Charitable Contributions).