December 1, 2021
charitable donation deductions

The holidays often inspire more taxpayers to donate than any other time of year. Charitable donations are often deductible when filing returns and can provide you with more money back for your refund. However, if you are expecting an itemized deduction, you should know that there are limitations for qualified contributions.

What are qualified organizations?

Your chosen organization must qualify under section 170( c ) of the IRS code for you to file an itemized deduction. Qualified entities include:

  1. A state, possession of the US, the US, or the District of Colombia.
  2. A corporation, community chest, foundation, fund, trust, organized or created in the US and operated exclusively for charitable, religious, educational, scientific purposes, cruelty prevention, or literary purposes.
  3. A religious organization (church, synagogue, etc.)
  4. Nonprofit volunteer fire company
  5. Local, federal, or state law created civil defense organization
  6. War veterans’ organization or its auxiliary, post, trust, or foundation
  7. Domestic fraternal society operating under the lodge system (the donation must be used exclusively for charity)
  8. Nonprofit cemetery (funds must be used for the care of the cemetery as a whole)

What are deduction limitations?

In short, you can only deduct up to 50% of your gross income in contributions. Donations to organizations for veterans, cemeteries, fraternal societies, and some private foundations are limited to 30% of your adjusted gross income. You can utilize the IRS Tax Exempt Organization Search to indicate the limitations for your deduction.

The importance of correctly filing deductions

When you choose to utilize deductions, whether for charitable donations or work-related expenses, it’s important to only file deductions that you qualify for. This may sound like common sense, but selecting deductions that you don’t qualify for can result in a penalty from the IRS. Owing the IRS is more trouble than what it’s worth, so if you’re unsure about which deductions you qualify for, it’s best to ask a professional.

Did you make a mistake while filing?

Mistakes happen, but when the tax debt starts to pile on there are professionals available to assist you. Optima Tax Relief offers free consultations for tax debt relief at (800)536-0734.