8070 / What are the income percentage limits for deduction of a charitable contribution?

Editor’s Note: Under the 2017 tax reform legislation, the 50 percent AGI limitation on cash contributions to public charities and certain private foundations increased to 60 percent for 2018-2025. The 2025 OBBB made the 60 percent AGI limit permanent.  The 2020 CARES Act lifted the 50/60 percent income limitations discussed below for 2020 and 2021, so that contributions could be deducted up to the full amount of a taxpayer’s AGI.

The IRC makes a distinction between gifts “to” a charitable organization and gifts “for the use of” a charitable organization.

60 percent limit. Generally, an individual is allowed a charitable deduction of up to 60 percent (50 percent prior to 2018) of his adjusted gross income for any contribution (other than certain property, see Q 8073) to: churches; schools; hospitals or medical research organizations; organizations that normally receive a substantial part of their support from federal, state, or local governments or from the general public and that aid any of the above organizations; federal, state, and local governments. Also included in this list is a limited category of private foundations (i.e., private operating foundations and conduit foundations)¹ that generally direct their support to public charities. The above organizations are often referred to as “60 percent-type organizations.”²

30 percent limit. The deduction for contributions of most long-term capital gain property to the above organizations, contributions for the use of any of the above organizations, as well as contributions (other than long-term capital gain property) to or for the use of any other types of charitable organizations (i.e., most private foundations) is limited to the lesser of (a) 30 percent of the taxpayer’s adjusted gross income, or (b) 60 percent of adjusted gross income minus the amount of charitable contributions allowed for contributions to the 60 percent -type charities.³

20 percent limit. The deduction for contributions of long-term capital gain property to most private foundations (see Q 8074) is limited to the lesser of (a) 20 percent of the taxpayer’s adjusted gross income, or (b) 30 percent of adjusted gross income minus the amount of charitable contributions allowed for contributions to the 30 percent -type charities.⁴

Deductions denied because of the 60 percent, 30 percent, or 20 percent limits may be carried over and deducted over the next five years, retaining their character as 60 percent, 30 percent, or 20 percent type deductions.⁵

Gifts are “to” a charitable organization if made directly to the organization. Even though the gift may be intended to be used by the charity, and the charity may use it, if it is given directly to the charity, it is a gift to the charity and not “for the use of” the charity, for purposes of the deduction limits. Unreimbursed out-of-pocket expenses incurred on behalf of an organization (e.g., unreimbursed travel expenses of volunteers) are deductible as contributions “to” the organization if they are directly related to performing services for the organization (and, in the case of travel expenses, there is no significant element of personal pleasure, recreation, or vacation in such travel).⁶

“For the use of” applies to indirect contributions to a charitable organization.⁷ The term “for the use of” does not refer to a gift of the right to use property. Such a gift would generally be a nondeductible gift of less than the donor’s entire interest (see Q 8077).