740 / What are the income percentage limits that apply to charitable contributions?

The CARES Act also lifted the 60 percent AGI limit for 2020. This relief was also extended through 2021. Cash contributions to public charities and certain private foundations in 2020 were not subject to the AGI limit (contributions to donor advised funds, supporting organizations and private grant-making organizations remained subject to the usual AGI limits). Individual taxpayers can offset their income for 2020 up to the full amount of their AGI, and additional charitable contributions can be carried over to offset income in a later year (the amounts are not refundable). The corporate AGI limit was raised from 10 percent to 25 percent (excess contributions also carry over to subsequent tax years). Taxpayers must elect this treatment.²

Fifty percent limit (60 percent for tax years 2018-2025). An individual is allowed a charitable deduction of up to 50 (or 60) percent of his adjusted gross income for a charitable contribution 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 foundations³) that generally direct their support to public charities.⁴ The above organizations are often referred to as “50 (or 60) percent-type charitable organizations.”

Thirty 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, see Q 741) to or for the use of any other types of charitable organizations (i.e., most private foundations, see Q 743) is limited to the lesser of (a) 30 percent of the taxpayer’s adjusted gross income, or (b) 50 percent of adjusted gross income minus the amount of charitable contributions allowed for contributions to the 50 (or 60) percent-type charities.⁵

Twenty percent limit. The deduction for contributions of long-term capital gain property to most private foundations (see Q 741 and Q 743) 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.⁶

Deductions denied because of the 50 (or 60) percent, 30 percent or 20 percent limits may be carried over and deducted over the next five years, retaining their character as 50 (or 60) percent, 30 percent or 20 percent type deductions.⁷

Gifts are “to” a charitable organization if made directly to the organization. “For the use of” applies to indirect contributions to a charitable organization (e.g., an income interest in property, but not the property itself).⁸ 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.