14.17 Ceiling on Charitable Contributions
Unless you make donations that are very substantial in relation to your adjusted gross income (Line 38, Form 1040), you do not have to be concerned with the deduction ceilings discussed in this section. For cash contributions, the deduction ceiling is generally 50% of adjusted gross income, but in some cases a 30% limit applies. For property donations, the deduction limit is generally 30% of adjusted gross income, although it sometimes is 50% or even 20%. As detailed below, the specific limit for each donation depends on whether it is made to a “50% limit organization” and whether it is capital gain property. Where you have made contributions subject to different ceilings, the ceilings are applied in a specific order and are subject to an overall ceiling of 50% of adjusted gross income. If your deduction is limited by any of the ceilings, a five-year carryover is allowed for the excess (14.18).
Planning Reminder
Volunteer expenses.
The deduction ceiling for unreimbursed expenses you incur doing volunteer work for a charity (14.4) is 50% of adjusted gross income if your services were for a 50% limit organization such as a church or college (see the list below), or 30% of adjusted gross income if the services were on behalf of an organization other than a 50% limit organization.
30% limit for contributions for the use of an organization.
If a donation is treated as for the use of, rather than directly to, any organization, it is deductible under the 30% ceiling described below for contributions to organizations that are not 50% limit organizations.
This 30% ceiling applies to a charitable unitrust or annuity trust income interest that is deductible under the rules for donations through trusts (14.13). A charitable remainder trust transfer is also subject to the 30% limit if the trust provides that after the death of the income beneficiary, the property is to be held in the trust for the benefit of the charity, rather than distributed to the charity.
Deductible expenses for supporting a student in your home (14.5) are considered to be for the use of a charitable organization and thus subject to the 30% ceiling for contributions to organizations that are not 50% limit organizations.
Contributions to 50% Limit Organizations
Organizations in the 50% limit category include churches, schools, publicly supported charities, and private foundations in the list below. Cash contributions to such organizations are deductible up to 50% of adjusted gross income and contributions of capital gain property held long term generally are deductible up to 30% of adjusted gross income.
The 50% deduction ceiling also applies to donations to the United States, Puerto Rico, a U.S. possession, a state, a political subdivision of a state or U.S. possession, or an Indian tribal government.
Filing Tip
50% ceiling.
Contributions of cash, ordinary income property, and capital gain property held short term are deductible up to 50% of adjusted gross income if made to the following types of charitable organizations:
- Churches, synagogues, mosques, and other religious organizations.
- Schools, colleges, and other educational organizations that normally have regular faculties and student bodies in attendance on site.
- Hospitals and medical research organizations associated with hospitals.
- Government-supported or publicly supported foundations for state and municipal universities and colleges.
- Religious, charitable, educational, scientific, or literary organizations that receive a substantial part of their financial support from the general public or a government unit. Libraries, museums, drama, opera, ballet and orchestral societies, community funds, the American Red Cross, the Heart Fund, and the United Way are in this category. Also included are organizations to prevent cruelty to children or animals, or to foster amateur sports (provided they do not provide athletic facilities or equipment).
- Private operating foundations.
- Private non-operating foundations that distribute their contributions annually to qualified charities within 2 months after the end of their taxable year.
- Private non-operating foundations that pool donations and allow donors to designate the charities to receive their gifts, if the foundation pays out all income within 2 months after the end of the tax year.
- Organizations that normally receive more than one-third of their support from the general public or governmental units.
Filing Instruction
30% ceiling for capital gain property held long term.
The deduction ceiling is generally 30% (not 50%) of adjusted gross income where you donate to a 50% limit organization property that would have resulted in long-term capital gain had you sold it at fair market value.
The 30% ceiling applies where the fair market value of the property is deductible under the rules discussed in 14.6. This includes donations of appreciated securities and real estate held long term. It also includes donations of appreciated tangible personal property (such as furniture or art) held long term where the organization’s use of your gift is directly related to its tax-exempt charitable purposes.
However, you may elect to apply the 50% ceiling instead of the 30% ceiling to such property donations if you reduce the fair market value of the property by the appreciation (14.19).
If you donate tangible personal property held long term that is not used by the organization for its tax-exempt charitable purposes, so that your deduction must be reduced for the appreciation (14.6), the reduced amount is deductible under the 50% ceiling.
Contributions to Non–50% Limit Organizations
If a contribution is made to a qualifying organization that is not in the above list of 50% limit organizations, a 30% or 20% deduction ceiling applies. Organizations in this category include veterans’ organizations, fraternal societies, nonprofit cemeteries and private non-operating foundations that do not meet the payout requirements for 50% limit status.
The 30% limit applies to contributions of cash, ordinary income property, and capital gain property held short term. The 20% limit applies to contributions of capital gain property held long term (more than one year). However, the actual ceiling may be less than 30% or 20% of adjusted gross income where in the same year you have made contributions to 50% limit organizations. In that case, follow Steps 2 and 4 below in applying the deduction ceilings.
Law Alert
Qualified Conservation Contributions
As noted in the Law Alert on this page, the higher deduction ceilings that applied to qualified conservation contributions (14.10) for 2006- 2011 will not apply for 2012 without Congressional extension of the prior law. Without an extension, the regular 30% or 20% deduction ceiling for capital gain property will apply. See the e-Supplement at jklasser.com for an update on proposals to extend the higher limits.
Applying the Deduction Ceilings
The various deduction ceilings are applied in a specific order, with the total deduction for the year limited to 50% of adjusted gross income. Check above for the ceilings that apply to your donations and then apply the ceilings in the following order. See the discussion of carryover rules (14.18) if a portion of your deduction is barred by the deduction ceilings.
Filing Instruction