The Average Charitable Deduction for Taxes Based on Income

Annual Income Limitations

To ensure that you cannot completely eliminate your tax bill for the year with your charity donations, the IRS limits the amount you can deduct each year. This limitation ranges from 20 percent to 50 percent of your adjusted gross income, depending on the type of property you donate and the organization you donate it to. As a result, you might need to separate or categorize your charitable donations each year.

The first category of donations are those that you make to what the IRS calls a "50 percent limit organization." This category covers all property and cash donations you make to charities such as churches, nonprofit educational organizations, hospitals, the U.S. or a state government and any foundation, trust, corporation or community chest that operates solely for charitable, educational, humanitarian, literary, scientific or religious purposes. When you add up your annual donations to these types of organizations at the end of the year, the total is only deductible to the extent it doesn't exceed 50 percent of your AGI. If it does, you can carry the excess forward and deduct it in one of five future tax years.

A majority of the IRS qualified organizations that allow you to claim a charitable deduction for your donations will qualify as 50 percent limit organizations. However, some organizations exist that the IRS reduces the annual limit to 30 percent of your AGI rather than 50 percent. If the organization is not specifically listed as a 50 percent limit organization in IRS Publication 78, then it's a 30 percent limit organization. This includes war veterans' associations, fraternal societies, nonprofit cemeteries and a number of private nonoperating foundations.

If your charitable donation consists of property that is worth more than when you purchased it, then it is subject to special limitations as capital gain property. For example, if you purchase a share of stock in 2000 for $10 and donate it in 2011 when it trades for $50, then it's capital gain property since if you sell it, you will have $40 in capital gain. When you make a donation of capital gain property to a 50 percent limit organization, the annual limitation decreases to 30 percent if you choose to deduct the fair market value of the property. However, if you claim a deduction for your purchase price instead ($10 rather than $50), then the 50 percent limit applies. Similarly, donating this type of property to a 30 percent limit organization reduces the annual limitation to 20 percent of your AGI when deducting the fair market value.