People often make charitable donations out of the goodness of their hearts. However, the Internal Revenue Service rewards these actions with deductions on their taxes. If you've made a significant donation of your own, you need to know the limits on how much you can deduct from your taxes each year.
Donations of Cash
If you donate cash — or cash equivalents such as checks or a donation made by credit card — the IRS limits the amount of your deduction based on your adjusted gross income. Charities such as religious organizations, schools, hospitals and governments are often subject to a 50 percent limit, meaning you can't deduct contributions made in excess of 50 percent of your adjusted gross income. For example, if your adjusted gross income equals $30,000, you can't deduct more than $15,000 in church contributions. Other charitable groups, such as cemeteries and veterans' associations, are subject to a 30 percent limit.
Donations of Property
When you donate property that has increased in value, such as a plot of land, you need to know whether you've had it for at least one year. If so, the increase in the property value counts as a capital gain. If you donate a capital gain property, you can deduct the full fair-market value. However, if you have an ordinary income property — property held for less than one year — you can only deduct your tax basis in the account. Donations of capital gain property are subject to lower annual limits: Donations made to 50 percent organizations are limited to 30 percent, and donations to 30 percent organizations are limited to 20 percent.
Saving Extra Donations
If your donations for the year exceed your maximum donation amount, such as if you donate a piece of land that has greatly increased in value, you can't deduct all of it in the first year. However, the IRS permits you to carry the excess over through the next five years until you've deducted the entirety. For example, if you have an adjusted gross income of $40,000 and you donate $50,000 to a 50 percent organization, you would only be able deduct $20,000 the first year and carry over the remaining $30,000. In the second year, if your adjusted gross income equals $40,000, you could deduct another $20,000 and carry over the remaining $10,000.
You can't write off any of your donations to charity if you don't itemize your deductions. The IRS classifies charitable donations as an itemized deduction, so to write them off on your taxes, you have to give up the standard deduction. Accordingly, you should only claim your charitable donations as a tax deduction when your deductible charitable donations plus your other itemized deductions is greater than your standard deduction. Other itemized deductions include state and local income taxes, property taxes, mortgage and home equity interest, and casualty and theft losses.