Charitable Deductions

Charitable Deductions Now may be the time to donate that old car sitting in your driveway for the last two years, or to donate some of that old furniture laying around in your attic. The IRS allows you to deduct these various household items at fair market value, as long as you have the proper receipts documenting their worth at the time of the donation. The best way to defer and pay less taxes is to be organized! Update and document your automobile mileage log books, assemble all of your bank statements and canceled checks, and organize all of your important transactions and documents. The more organized you are now, the less likely you'II be surprised on April 15th. With better year end planning, your tax liability will be more manageable.

Volunteer Work

Volunteer work is not deductible, but the out-of-pocket expenses incurred while volunteering can be deducted. This may include car expenses or alternatively, the mileage rate of 14 cents per mile may be used for miles driven related to charitable services. Parking fees and tolls are also deductible.

Student Residents

An unusual charitable deduction is a student living with a taxpayer. If the student is neither a dependent nor a relative, lives in the taxpayer's home under a written agreement with a qualified organization, and is enrolled full time in the 12th grade or lower (i.e. foreign exchange student) the costs incurred for that student living with them are deductible. Expenses may include books, tuition, food, clothing, medical and dental care, and transportation. This deduction is limited to $50 per month per student per year. However, if the taxpayer receives any form of compensation or reimbursement for any part of the costs, no costs are deductible.

Property Contributions

Property contributions to a charity are deductible in the year the donor relinquishes all ownership or control over the property. For a gift of real property, the deduction occurs when the deed is executed. The same goes for a stock certificate. If the taxpayer donates the stock but retains the voting rights, the contribution is not considered complete. Artwork donations and any related copyrights must also be relinquished before the deduction. The amount of the charitable deduction for donations of property is normally the fair market value at the time of the donation.

Accounting for charitable contributions becomes difficult when contributing capital gain property. This is any property that would have resulted in the recognition of a long-term capital gain if sale on the contribution date had resulted in the long-term capital gain to the donor. Examples include real estate, automobiles, antique furniture, stocks or securities. In such cases, the donation is limited to the donor's basis in the property.


Three limitations apply to the deduction for charitable contributions in a given year. The first limitation is that it cannot exceed 50 percent of a taxpayer's adjusted gross income (AGI) for the year. Unused contributions can be carried forward and deducted over five years. The second limitation provides that the deduction is limited to 30 percent of AGI for cash and ordinary income property contributed to some noncooperation foundations. The final limitation provides that the deduction is limited to 20 percent AGI for appreciated long-term capital gain property given to some private noncooperating foundations.

Disclaimer: All materials presented on this web site are for informational purposes only and should not be considered as a substitute for any tax, accounting or legal advice. Some of the material may have changed due to new legislation. Please contact us for specific information.