Know How Tax-Deductible Donations work

Tax deductible donations are contributions of money or goods to a tax-exempt organization that can reduce taxable income. To claim a deduction, you must itemize on your tax return by filing Schedule A of IRS Form 1040. Donating to charity in the US is often seen as a tax-beneficial decision, but the amount of charitable cash contributions that taxpayers can deduct as an itemized deduction is limited to 60% of their adjusted gross income (AGI). Qualified contributions are not subject to that same limitation, and individuals can deduct up to 100% of their AGI.

Corporations can deduct qualified contributions of up to 25% of their taxable income, which carry over into the next year. Qualified organizations to donate to include a state or United States possession, community chest, corporation, trust, fund, or foundation, organized or created in the US or its possessions, or under the laws of the US, 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.

A church, synagogue, or other religious organization, a war veterans’ organization, a fire company, a civil defense organization, a fraternal society, a cemetery company, or a domestic fraternal society may all make charitable contributions as long as the money is allocated for the perpetual maintenance of the cemetery as a whole rather than a specific lot or mausoleum crypt (SAM, 2023).