Charitable Contributions Deduction
Tax deductions are a fantastic way to reduce your overall taxes by decreasing your taxable income. There are many different kinds of tax deductions recognized by the IRS. One such deduction is the Charitable Contributions Deduction. This deduction is governed by Section 170 of the Internal Revenue Code. Let’s briefly explore some of the basic requirements of this deduction.
First, the organization to which you are donating must be a qualified organization, as defined by IRC 170(c). Some examples of qualified organizations include an organization or trust created for war veterans; religious, scientific, and educational foundations; and gifts by an individual to be used exclusively for charitable purposes. Additionally, the contributions must actually be paid to the charitable fund or purpose by the end of the taxable year.
For most donations, this deduction can only be used to reduce up to a set percentage of your taxable income (unless it is in the very limited circumstance of a “qualified contribution” of certain capital business assets). This percentage is generally capped at 50%, but there are some deviations from this percentage depending on the circumstances of the contribution. While you are of course free to donate your money as you choose, the number of donations that you can deduct to reduce taxes under IRC 170 is capped. The professionals at The Center for Financial, Legal, and Tax Planning, Inc. are more than knowledgeable with regards to the Charitable Contribution Deduction. Please contact us at (618) 997-3436 for more information.