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Charitable donations are tax deductible. This reduces your taxable income, and lowers your tax bill.

"You may deduct charitable contributions of money or property made to qualified organizations if you itemize your deductions." (IRS Publication 78)

Where to Claim the Charitable Donation Deduction

You claim your tax deduction on Form 1040, Schedule A. This means you must itemize. If you Standard Deduction is greater than your Itemized Deductions, then your Charitable Donations will not help you lower your tax liability.

Rules for Claiming the Charitable Donation Deduction

Your gift of cash or property must meet certain criteria in order to be tax-deductible.

You must actually donate cash or property. A pledge or promise to donate is not deductible until you actually pay.
You must donate to a qualified 501(c)(3) tax-exempt organization. Charities will let you know if they have received their 501(c)(3) tax-exempt status.

Some organizations are not required to obtain 501(c)(3) status from the IRS. These include churches and other religious organizations.
You must be able to itemize. Giving to charity is a great tax planning strategy, but it only works for people who are eligible to itemize their deductions.
You must meet recordkeeping requirements. This includes saving canceled checks, acknowledgement letters from the charity, and appraisals for donated property.

Non-Cash Donations of Property

Donations of property (other than cash) are subject to strict recordkeeping and substantiation rules. You must be able to substantiate the fair market value of the goods or property you donated, plus keep any written acknowledgements you receive from the charity.

Fair Market Value of Donated Property
You must make an assessment of the fair market value of the property you donate.

Non-Cash Donations Totalling More Than $500
You must attach IRS Form 8283 if your total non-cash donations exceeds $500.

Car Donations: Must Have Written Acknowledgement
If you donate a car, truck, boat, airplane, or other vehicle, and the vehicle is worth more than $500, you must received a written acknowledgement from the non-profit before you can claim a tax deduction.

Non-Cash Donations over $5,000: Must Have Written Appraisal
If you donate property worth more than $5,000, you must obtain a written appraisal of the property's fair market value.

Limits on the Charitable Donation Deduction

Your charitable donation tax deduction may be limited. There are limits specific to charitable donations, and there are general limits on itemized deductions.

50%, 30%, and 20% Limits on Charitable Donations

Generally, you can deduct cash donations in full up to 50% of your adjusted gross income.
Generally, you can deduct property donations in full up to 30% of your adjusted gross income.
Generally, you can deduct donations of appreciated capital gains assets in full up to 20% of your adjusted gross income.

Charitable donations in excess of these limits can be carried over to the following tax year. The excess donations can be carried over for a maximum of five years.

100% Limit for Charitable Donations

Only for 2005, you can deduct charitable donations in full up to 100% of your adjusted gross income. To qualify for the 100% limitation, you must donate cash between August 28, 2005, and December 31, 2005. These special cash donations are reported on Schedule A, Line 15b.

Not Tax Deductible

Donations are not tax deductible if given to any of the following:

Political parties, political campaigns, or political action committees.
Donations given to individual people.
Fees or dues paid to professional associations.
Donations to labor unions, chambers of commerce, or business associations.
Donations to for-profit schools and hospitals.
Donations to foreign governments.
Fines or penalties paid to local or state governments.
The value of your time for services rendered to a non-profit.