One of the oldest and most common types of tax deduction is donating money or goods to a charitable organization. In general, all donations made to qualified charitable organizations can be deducted as long as the amount claimed does not exceed one-half of a taxpayer's adjusted gross income. Still, if the contributions do exceed one-half of one's income, the excess can be carried forward to future tax returns for up to five years.

With that in mind, the next question would have to be, "what is a qualified charitable organization?" The answer might cover more than one would expect on first impression. In addition to churches and other religious organizations, qualified charitable organizations include trust funds and foundations created to promote educational, scientific, or literary purposes. They also include governments themselves, including state, local, and even Indian tribal governments (although donating to the government sounds a lot like paying taxes).

Qualified Organizations

In order to qualify as a charitable organization for tax purposes, the organization (except for churches and governments) must apply for the status. It is not sufficient that the organization be non-profit, which is a broader distinction. To qualify, the organization must operate for the benefit of the public at large, not only a limited group. Further, money or assets held by the organization cannot be used by officers or representatives of that organization and its assets cannot be used for non-charitable purposes.

In addition to donations to that organization being tax deductible, the organization itself can qualify for exemptions to property and income taxes. Such charitable institutions include museums, hospitals, and private schools, but not trade associations or social clubs (even though they might hold official non-profit status) because they exist mainly for the benefit of their members.

Implementing Charitable Deductions

A taxpayer needs to get a receipt for any donations made to a qualified charity, whether it be for money or physical items, such as clothes. The donations cannot be deducted if someone receives a "financial or economic benefit" from the organization equal to the donation. Also, a person cannot deduct the time or service provided to the charity but can deduct travel expense, meals, or lodging costs incurred with donating that time.

Other types of charitable donations that are not deductible are money given to individuals or most charities outside the United States, except for Mexico, under a treaty with the United States, or Canada, if part of a person's income comes from a Canadian source.

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