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Date posted: June 5, 2008

I received $140,000 in tax-free income from a personal injury suit. If I give 10% to charity, can I deduct it?

I received $140,000 in tax-free income from a personal injury suit. If I give 10% to charity, can I deduct it?

— Submitted by James

A charitable donation of cash is deductible, even if the money comes from a tax-free source, such as an inheritance, insurance proceeds, or a personal injury settlement. To deduct the donation:

  • The funds must go to an IRS-approved charity.
  • You must obtain an acknowledgment from the charity (since the gift exceeds $250, your canceled check or bank statement isn't sufficient).
  • You must itemize deductions.
  • The amount of the deduction can't exceed 50% of your adjusted gross income. However, if the deduction is limited this year because of the AGI limit, you can carry the excess forward for up to five years.