Wiley Tax Preparer: A Guide to Form 1040

CHAPTER 23

Charitable Contributions

Taxpayers who contribute cash or noncash items to a qualified organization may deduct their charitable contributions. The contributions must be made with no expectation of receiving any goods or services in return. Only taxpayers who itemize deductions can deduct their charitable contributions.

Deductions can include cash, securities, and noncash items of value as well as out-of-pocket expenses incurred while performing services for the charitable organization. The amount of the deduction may be limited by a taxpayer's adjusted gross income. However, excess contributions can be carried forward for up to five years.

No deduction is allowed without proper substantiation, the form of which varies depending on the type and amount of contribution involved.

Qualifying Organizations

Only donations to a qualified organization can be deductible. There are five categories of qualified organizations:

1. An organization organized or created in or under the laws of the United States (or its possessions) that is operated for a religious, charitable, educational, scientific, or literary purpose, or for the prevention of cruelty to children or animals. An organization that fosters national or international amateur sports competition may also be qualified.

2. War veterans' organizations, such as posts, auxiliaries, trusts, and foundations, that are organized in the United States or any of its possessions.

3. Domestic fraternal societies, orders, and associations ...