What Is the Maximum Allowable Donation for Taxes?

The U.S. tax code provides a deduction for contributions made to qualified charitable organizations, such as religious groups, schools, and nonprofit hospitals. A charitable contribution is a voluntary gift made without expecting to get anything of substantial value in return. The tax system encourages giving but establishes limitations on the amount that can be deducted in any tax year. These caps are based on a percentage of the donor’s income and vary depending on the type of property donated and the recipient organization.

Prerequisite for Deduction Itemizing

The ability to deduct a charitable donation depends on a taxpayer’s decision to itemize deductions on their tax return. Taxpayers choose between taking the standard deduction—a fixed dollar amount—or itemizing individual deductible expenses like charitable gifts, which are reported on Schedule A of Form 1040. A taxpayer only receives a tax benefit from donations if their total itemized deductions exceed their standard deduction amount.

Other common itemized deductions include mortgage interest, state and local taxes (up to $10,000 per household), and certain medical expenses. If the sum of these expenses is less than the standard deduction, the taxpayer will choose the standard deduction, and the specific limits on donations become irrelevant. For the 2024 tax year, the standard deduction is $14,600 for single individuals, $29,200 for married couples filing jointly, and $21,900 for heads of household. Due to high standard deduction amounts, most taxpayers no longer itemize.

The AGI Limits for Cash Contributions

For taxpayers who itemize, deduction amounts are capped by limits based on their Adjusted Gross Income (AGI), which is calculated from gross income after subtracting specific deductions. The limit for cash contributions to most public charities, known as “50% limit organizations,” is 60% of the taxpayer’s AGI. These organizations include churches, educational organizations, and hospitals.

For instance, a taxpayer with an AGI of $100,000 can deduct a maximum of $60,000 in cash donations to these public charities in that tax year. Any amount donated above this limit may be carried over to future tax years. A lower percentage limit applies to cash contributions made to other qualified organizations, including veterans’ organizations, fraternal societies, and certain private non-operating foundations. For these groups, the deduction is limited to 30% of the taxpayer’s AGI.

Limits for Non-Cash Contributions

The rules for deducting non-cash property depend on the asset type. A taxpayer can deduct the property’s fair market value at the time of the contribution, subject to AGI limits. The rules differ for ordinary income property and long-term capital gain property. Non-cash gifts, when combined with cash contributions, are subject to an overall limit of 50% of AGI.

Ordinary Income Property

Ordinary income property is an asset that would result in ordinary income or a short-term capital gain if sold. This includes business inventory, art created by the donor, and stocks held for one year or less. The deduction is limited to the lesser of the property’s fair market value or its cost basis (the original purchase price).

This rule prevents a taxpayer from getting a tax benefit greater than their economic investment in the property. For example, if inventory that cost $1,000 has a retail value of $2,500, the deduction is limited to the $1,000 cost basis. These contributions to public charities fall under a 50% of AGI limitation.

Long-Term Capital Gain Property

Long-term capital gain property includes assets like stocks, bonds, or real estate held for more than one year. When donating this property to a public charity, the donor can deduct the full fair market value and avoid paying capital gains tax on the asset’s appreciation. The deduction for these donations to public charities is limited to 30% of the taxpayer’s AGI.

For example, if a taxpayer with a $200,000 AGI donates stock worth $70,000, their deduction is capped at $60,000. A lower limit of 20% of AGI applies to donations of capital gain property made to other organizations, like certain private foundations.

Contribution Carryovers

If a taxpayer’s donations exceed the AGI limits, the excess amount can be carried over and deducted in future tax years for a maximum of five years. In a carryover year, the taxpayer must deduct current year contributions first before applying any carryover amounts. The carried-over deductions remain subject to the original AGI percentage limits in the year they are used.

For example, if a cash contribution carryover was subject to the 60% AGI limit, it cannot exceed 60% of the AGI in the future year it is claimed. If a taxpayer has carryovers from multiple years, they must be used on a first-in, first-out basis. Any excess contribution not used within the five-year window expires.

Substantiation and Reporting Requirements

Claiming a charitable deduction requires specific documentation, and failure to meet IRS rules can result in the deduction being disallowed. The requirements vary based on the donation’s amount and type.

• For donations under $250, you must keep a reliable record like a canceled check, bank statement, or a written receipt from the charity showing the organization’s name, date, and amount.
• For donations of $250 or more, you must obtain a “contemporaneous written acknowledgment” from the charity before filing your tax return. This document must state the contribution amount, describe any property given, and state whether the organization provided any goods or services in return.
• If your total non-cash property donations exceed $500 for the year, you must file Form 8283, Noncash Charitable Contributions. This form requires details about the property, its acquisition date, cost basis, and fair market value.
• For a non-cash gift of an item or group of similar items valued at more than $5,000, you must obtain a qualified written appraisal. The appraiser and charity must sign the appropriate sections of Form 8283.