Charitable Contribution Deductions

If you donate cash or property to an IRS-recognized charity, you not only help your favorite philanthropy but also gain a deduction when itemizing personal deductions. The amount of your deduction reduces your tax bill according to the tax bracket you are in. If you are in the 25% tax bracket, a $100 donation saves you $25 in taxes.

Donations are subject to specific substantiation rules. Without proper proof, you cannot claim a deduction. You may need to obtain certain documentation or, depending on the nature of the donation, to obtain written appraisals and file certain tax forms.

While you can be as generous as you want and can afford, the annual tax deduction can be limited in two key ways:

• There is a ceiling on charitable contribution deductions based on the type of donation and the nature of the charity as well as the amount of your adjusted gross income. Excess contributions can be carried forward for up to five years.
• There is a reduction on itemized deductions, which includes charitable deductions, if you are a "high-income" taxpayer. This classification depends on your adjusted gross income, and the threshold changes annually.