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Only donations to qualified organizations can be deducted. These include such to nonprofit religious groups, schools, or community organizations.

Itemizing Deductions

You need to itemize your deductions in order to be eligible for tax deduction. The standard deduction amount depends on your filing status. It is also adjusted for inflation annually. Other itemized deductions include mortgage interest, state and local income taxes, and investment expenses. It would be reasonable to choose the standard deduction if your itemized deductions wouldn’t exceed the standard. In this case, your donations won’t reduce your taxes at all. A deduction for your charitable donations cannot be claimed.

Deduction Valuation

The amount of your donation is usually equivalent to the fair market value of what you donated. If the item you donated costs more than you paid for it, you won’t be able to deduct the actual value, only the amount you paid. For example, if you bought second-hand clothes and then donated them to charity, you could only deduct what you paid for the clothes, not the bigger fair market value.

Special Rules

Sometimes, special rules apply. Donated cars are one example. If the organization sells the car, the tax benefits are limited to its sale price. You can deduct the fair market value if the charity uses the car.

Limitations

The value of donations to charity for one year cannot be more than 50 percent of the gross adjusted income received in that year. Donations to certain organizations, such as veterans clubs, are limited to 30 percent of the gross income. There is an additional limit on appreciated property, such as stocks. Such donations are also limited to 30 percent of the income, even if they are donated to organizations, to which the 50 percent limit normally applies.

These donations are limited to 20 percent of your gross income if you donate them to organizations, to which the 30 percent limit applies.