9059 / What deduction is an individual allowed to take with respect to gifts made to charitable organizations?

The amount that may be deducted in any one year is subject to certain income percentage limits that depend on the type of property, the type of charitable organization to which the gift is made, and whether the contribution is made directly “to” the charity or “for the use of” the charity (see Q 9064). Taxpayers are required to itemize deductions in order to take a charitable deduction.

Generally, a gift of less than an individual’s entire interest in property is not deductible, though certain exceptions to this rule exist (see Q 9070 and Q 9071).

For a charitable contribution to be deductible, the charity must receive some benefit from the donated property.³ In addition, the donor cannot expect to receive an economic benefit (aside from the tax deduction) from the charity in return for the donation.⁴ For instance, if a taxpayer contributes substantially appreciated property, and later reacquires it from the charity under a prearranged transaction, or if the charity sells the appreciated property and uses the proceeds to purchase other property from the taxpayer under a similar arrangement, the taxpayer is required to recognize gain on the contribution.⁵ However, where there is no arrangement and no duty on the part of the charity to return the property to the donor, the taxpayer is entitled to the deduction. In addition, if the charity does return the property, the taxpayer receives a new basis in the property (i.e., the price he paid to reacquire it).⁶

In determining whether a payment that is partly in consideration for goods or services (i.e., a quid pro quo contribution) qualifies as a charitable deduction, the IRS has adopted the two-part test set forth in United States v. American Bar Endowment.⁷ Under these circumstances, for a charitable contribution to be deductible, a taxpayer must:

(1)   Intend to make a payment in excess of the fair market value of the goods or services received; and

(2)   Actually make a payment in an amount that exceeds the fair market value of the goods or services.⁸

The deduction amount may not exceed the excess of (1) the amount of any cash paid and the fair market value of the goods or services over (2) the fair market value of the goods or services provided in return.⁹

The Tax Court has held that tuition payments paid by taxpayers to religious day schools for the secular and religious education of their children were not deductible as a charitable contribution, including amounts paid to one of the schools for after-school religious education classes.¹⁰

Certain goods or services received in return for a charitable contribution may be disregarded for purposes of determining whether a taxpayer has made a charitable contribution, the amount of any charitable contribution, and whether any goods or services have been provided that must be substantiated or disclosed.¹¹ These items include goods or services that have an insubstantial value under IRS guidelines ($13.60 in 2025, $13.20 in 2024, $12.50 in 2023 and $11.70 in 2022), certain annual membership benefits and certain admissions to events.¹²

Prior to 2018, if a taxpayer made an otherwise deductible charitable contribution to a university (or other institution of higher learning) that directly or indirectly entitled the donor to purchase tickets for athletic events in the institution’s stadium, the contribution was only 80 percent deductible and only to the extent that the contribution was not found to be a payment for the tickets themselves.¹³ The 2017 tax reform legislation changed this rule so that no deduction is permitted. Prior to reform, the IRS had determined that the portion of the payment made to a state university’s foundation was deductible under IRC Section 170(l) even though the donor (an S corporation) received the right to purchase tickets for seating in a skybox at events in an athletic stadium of the university. The IRS reasoned that the portion of the payment to the foundation for the right to buy the tickets for seating was considered as being paid for the benefit of the university and, as such, 80 percent of such portion was deductible. The IRS found that the remainder of the payment (consisting of the ticket purchase, the right to use the skybox, the passes to visit the skybox, and the parking privileges) was not deductible.¹⁴

The IRS has found that contributions made to a university for the purpose of constructing a building providing meeting space for campus organizations qualified for a charitable deduction under IRC Section 170. With the exception of the meeting rooms leased to individual sororities, the facilities in the building would be open to all students. Because the facts indicated that the contributions were indeed gifts to the college, and not gifts to the sororities using the college as a conduit, the IRS determined that the requirements of Revenue Ruling 60-367,¹⁵ which discussed the circumstances under which donations that benefitted a college fraternity would be considered a gift to an educational institution, had been satisfied.¹⁶