Eligibility of Charitable Contributions as Income Tax Deductions

• Donations to churches, schools, hospitals and organizations that receive a substantial part of their contributions from public or government sources are subject to a 50% maximum deduction. This means a taxpayer may take as deductions all contributions made to such organizations up to a maximum of 50% of the taxpayer's "contribution base" (adjusted gross income as determined without regard to any net operating loss carryback). Contributions of certain capital gains property to these organizations is subject to a 30% maximum deduction.


• Deductibility of contributions to "nonoperating foundations and organizations", such as war veterans' and fraternal organizations, public cemeteries and contributions made "for the use of" an organization that would normally be subject to the 50% maximum deduction, are limited to a 30% maximum deduction. This deduction limitation could be further reduced if the taxpayer made contributions to organizations eligible for the 50% maximum deduction during the same tax year. Contributions of certain capital gains property under these circumstances are limited to a 20% maximum deduction. A contribution is deemed to have been made "for the use of an organization" if the donation was made in trust to be held and administered for the organization (as opposed to a direct contribution to the organization itself).


• Individuals have a five year "carry forward" for charitable contributions that exceed the deductible limitations in a given year.


• For contributions made after 8/17/2006, deductions for donations of household items and clothing will be allowed only if the property is deemed to be in "good condition or better". Furthermore the IRS may deny a deduction for contributions of minimal value. These restrictions won't apply if the deduction claimed for a single piece of clothing or single household item is more than $500.00 and a qualified appraisal for said item is attached to the return.


• Services rendered to a charitable organization are not deductible as a charitable contribution. However, most unreimbursed expenses incurred in connection with such services are deductible.


• Deductions are allowed for unreimbursed transportation and travel expenses (including meals and lodging) incurred in performing services for the charitable organization so long as there is no "significant element of personal pleasure, recreation or vacation".


• Amounts paid for fund raising activities (such as tickets to a charity event) are presumed to be the purchase price for an item of value. The taxpayer has the burden of showing that the amount paid is either not a "purchase" or the price paid exceeds the fair market value of admission to the event or other privileges associated with the event. Nevertheless, the purchase price of a raffle ticket is not deductible.

And remember "donations to the Rotary Club's Charitable Foundation are deductible. So be generous" your donation not only reflects Rotary's motto of "service above self", but also yields a tangible benefit to your bottom line!