8542 / How much of a charitable contribution is deductible?
Editor’s Note: The 2017 TCJA increased the 50 percent AGI limitation on cash contributions to public charities and certain private foundations to 60 percent. The 2025 OBBB made this limit permanent.1 The CARES Act removed the AGI limitation on cash contributions to charity for the 2020 and 2021 tax years. See Q 8543 for more details.
An individual who itemizes may take a deduction for certain contributions “to” or “for the use of” charitable organizations. A gift is made “to” a charitable organization if it is a direct gift of property to the charitable organization. An indirect contribution of an interest in property to a charity that does not result in a complete gift of the property itself is considered to be a contribution “for the use of” the charity. For example, a gift of an income interest in property, but not the underlying property itself, to charity is considered to be a gift “for the use of” the charity.2 The term “for the use of” does not refer to a gift of the right to use property such as office space. Such a gift would generally be a nondeductible gift.
The amount that may be deducted by the taxpayer in any tax year is subject to the income percentage ceilings explained in Q 8543 and Q 8544. The amount of the contribution depends on whether it is a gift of money or property; and, if the latter, the type of property. Also, for any charitable gift, the type of charity is relevant. These rules are explained in Q 8545 and Q 8546.
Charitable giving is discussed in detail in Q 9059 to Q 9073.
Planning Point: Notice 2021-42 extended the relief provided in Notice 2020-46 to allow employees to continue to forgo, or “donate,” sick, vacation and personal leave because of the COVID-19 pandemic without adverse tax consequences through the end of the 2021 tax year. After December 31, 2020 and before January 1, 2022, employers could make cash payments to Section 170(c) charitable organizations that provided relief to victims of the COVID-19 pandemic in exchange for sick, vacation or personal leave that their employees elect to forgo. Those amounts were not treated as compensation and the employees were not treated as receiving the value of the leave as income. Employees could not claim a charitable deduction for the leave donated to their employer. Employers, however, could deduct cash payments made to qualifying charities as Section 162 business expenses or Section 170 charitable contributions if the employer otherwise met the respective requirements of either section.
1. IRC § 170(b)(1)(G)(i).
2. Treas. Reg. § 1.170A-8(a)(2).