Charitable contributions deduction is a tax incentive offered to individuals that donate sums to a recognized charity. The tax deduction allows taxpayers to reduce tax amount, which is due to the tax authority. Contributions to the charity can be either made in the form of property or cash. In the US, the details of allowable deductions are listed on Schedule A of the IRS form 1040.
Charitable contributions deductions can be claimed for all payments made prior to the closing of the tax year. In case the contribution is made in the form of a property, the fair market value of the donated property can be deducted. Rules pertaining to calculating fair market value are explained in IRS Publication 561.
Qualified contributions that can be deducted from the income statement should fulfill criteria mentioned in internal revenue code section 170 (c). Some of the qualified charitable organizations in the US include the following.
IRS rules in the US specify that individuals should itemize their deductions if they have made charitable contribution in a particular year. In general an individual can deduct a maximum of 50% of the adjusted gross income that is computed by excluding net operating loss carry-backs. Charitable contributions made to certain veterans organizations, private foundations, cemetery organization, and fraternal societies are subject to a limit of 30% deductions from the adjusted gross income. Contributions to every public charity, private operating foundation, and certain private foundations are subject to 50% limitation. The 30% limit is applied to private foundation, domestic fraternal society, and those mentioned in section 170 (c) of the internal revenues code. IRS's Exempt Organizations Select Check: Deductibility Status Codes contains more information about type of charity organization and deduction limitation.
Financial education is so important, but barely taught at all in our schools. Having resources online is great, but not if they are inaccessible to so many. Thanks 508!