Charitable Deduction
A tax deduction for donations to qualified nonprofit organizations, reducing taxable income for itemizers.
What is Charitable Deduction?
A charitable deduction allows taxpayers who itemize their deductions to reduce taxable income by the amount donated to qualifying organizations recognized under IRS Section 501(c)(3). Deductible contributions include cash, property, and appreciated securities. The deduction is generally limited to 60% of adjusted gross income (AGI) for cash gifts to public charities, with lower limits for gifts to private foundations or non-cash property. Non-cash donations above $500 require Form 8283, and donations of appreciated property above $5,000 generally require a qualified appraisal.
Example
A taxpayer with $100,000 AGI donates $10,000 in cash and $5,000 of appreciated stock to a public charity. Both gifts are deductible: the $10,000 cash and $5,000 stock fair-market value reduce taxable income by $15,000, well within the 60% AGI limit of $60,000. Itemizing captures the full benefit that the standard deduction would not.