Deduction Limits

Charitable deductions are limited by income depending upon the type of contribution. Contributions in excess of the deduction limits described (1), (2), and (3) below, may be carried forward for five years. An amount can be carried over even though an individual does not itemize their deductions in the year of the contribution (carryover then equals excess over 50% of AGI).

1. 50% limit: Generally, contributions to specified organizations are deductible to the extent they don't exceed 50% of the taxpayer's Adjusted Gross Income (without any reduction for net operating loss carrybacks). This category includes churches, tax-exempt educational institutions and hospitals, federal, state local governmental units, if the contribution is used for public purposes, community chests, and certain private operating foundations.

2. 30% limit: This limit applies for gifts (other than capital-gain property) made to all other groups other than 50%-limit organizations. 30%-limit organizations include veteran organizations, fraternal organizations, public cemeteries, and private non-operating foundations. However, in a tax court case, the court ruled that a war veteran organization qualified for the 50% limit. 

Contributions are deductible to the extent of the 30% limit only if they are made for the use of a charitable organization. A special 30% limit applies to gifts of capital gain property to 50%-limit organizations that are deducted at FMV.

3. 20% limit: This applies to gifts of capital gain property made to all qualified organizations other than 50%-limit organizations.

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