Are College Donations Tax Deductible

What Are The Tax Benefits Of Giving To Charity

The tax benefits of donating to charity are simple: Deducting charitable donations from your taxes may reduce the amount of money youll owe to the federal government come April 15th, depending on your individual tax situation.

The IRS allows individuals to deduct charitable contributions up to 50% of their adjusted gross income, though 20% and 30% limits sometimes apply. Celebrities and the super wealthy often take advantage of these high limits and donate huge chunks of money to nonprofits. But even if youre not donating billions of dollars like Bill Gates, certain charitable contributions might still help reduce your tax burden.

How Much Can You Deduct

The amount of money that you can deduct on your taxes may not be equal to the total amount of your donations.

• If you donate non-cash items, you can claim the fair market value of the items on your taxes.

• If you donated a vehicle, your deduction depends on if the organization keeps the car or sells it at an auction. A Donors Guide to Vehicle Donation explains how your deduction is determined.

• If you received a gift or ticket to an event, you can only deduct the amount that exceeds the value of the gift or ticket.

Note: Limits on cash and non-cash charitable donations have increased or been suspended. Learn more about charitable deductions in 2020.

Understanding Tax Deductions For Charitable Donations

The old saying goes that its better to give than to receive. If you arent convinced, studies have shown that helping other people can make you happier and may actually help you live longer. And another added bonus? Doing good can reduce your tax bill when its time to write a check to Uncle Sam.

If youre interested in donating to a good cause while also reaping the tax benefits of charitable giving, its important to understand the tax rules. This article explains the most important aspects of tax deductions for charitable donations.

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Should You Have A 529 Plan

529 plans are an obvious choice for college savings for many families. Most plans have age-based investing options that automatically rebalance, taking more risk when your child is younger and less risk as they get older. You can open a 529 plan immediately on the website of your stateâs plan.

Whatever option you choose for saving for a college education, getting started today is one of the most critical decisions you can make. Youâll allow your money time to compound if you start early, and thatâs where a large portion of the value in your account will come from over time.

Tax Credits For College Students

There are two additional tax breaks that students in college might benefit from: the American Opportunity Tax Credit and the Lifetime Learning Credit .

The AOTC allows parents to reduce their tax bill by up to $2,500 for up to four years. Since its a refundable tax credit, it can increase the size of your tax refund even if it reduces your tax liability to a negative number.

Independent students and parents can qualify for the AOTC if they paid for qualified education expenses used for undergraduate courses. But the amount youre allowed to claim depends on your modified adjusted gross income . In order to get the full $2,500 credit, your MAGI cannot be higher than $90,000 (or over $180,000 if youre filing a joint tax return.

The LLC, on the other hand, is a nonrefundable tax credit. This means that you cant get a refund if the credit lowers your tax liability to an amount below zero. So youre better off claiming the AOTC. But still, the LLC is helpful because parents and students can claim the credit if theyre paying for an undergraduate education, graduate school or technical school. Plus, theres no rule saying that it can only be claimed for a certain number of years.

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What Does The Tuition And Fees Deduction Include

Expenses covered under the deduction include anything related to coursework, including tuition, books, supplies, equipment, and activity fees that must be paid to the school as a condition of enrollment. Costs related to room and board, insurance, student health fees, transportation, or other personal living expenses are not eligible for the deduction.

If you maintain a 529 college savings plan and took distributions to pay for college expenses in 2020, you may still be able to claim the tuition and fees deduction, as long as the expenses you’re deducting were not paid for using those funds. Expenses that were paid for using a scholarship, grant, or employer assistance cannot be deducted.

Also, you cannot claim the education-related federal tax credits The American Opportunity Tax Credit and The Lifetime Learning Tax Credit in conjunction with the tuition and fees deduction.

You’ll find more information about the qualified education expenses you paid for the year on Form 1098-T, which colleges and universities typically send to students by early February following the tax year.

Some Of The Same Rules Still Apply

While the CARES Act made giving more beneficial for people in 2020, many of the same basic rules for giving charitable contributions still apply. For instance, you aren’t permitted to deduct money that you’ve given to a charity that provided you with a personal benefit. An example would be purchasing a cheesecake at a school bake sale to raise money for a new football field. While the funds for the cheesecake you purchased are technically going to a good cause, this doesn’t qualify as a deductible amount because you technically participated in a commercial exchange.

You also can’t claim tuition paid to a school as a charitable contribution because you are paying for services rendered. This applies even if you’re covering tuition for a child who is not your own out of the kindness of your heart. You also cannot deduct the value of any gifts that you donate to teachers or school employees.

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Special Rules For Universities

If you make a donation to a university that grants you the right to buy tickets to an athletic event, only 80 percent of the donation is deductible. For example, if you give $20,000 to your alma mater in exchange for the right to purchase football season tickets, you can deduct only $16,000. However, if any portion of the donation is in exchange for the tickets themselves, you cannot deduct that portion. For example, if you donate $20,000 and receive football season tickets worth $1,000, your deduction is only $19,000.

The Student Loan Interest Deduction

One useful tax break for college graduates and their parents is the student loan interest deduction. For your 2021 taxes , this deduction is worth the amount you paid in interest for your student loans, up to $2,500, which is the maximum deduction.

In order to qualify for the deduction, you must meet the following criteria:

• You paid interest, in 2021, on a qualified student loan.
• Youre using any filing status except married filing separately.
• Your modified adjusted gross income is less than $85,000 if you file single, head of household or as a qualifying widow. Your MAGI is less than $170,000 if youre filing a joint return.
• No one else is claiming you as a dependent on their tax returns.

For a student loan to qualify for the deduction, you must have used the loan to pay higher education expenses for yourself or for one of your dependents .

To calculate your exact deduction, you can use the Student Loan Interest Deduction Worksheet that the IRS provides.

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Indiana Tax Credit For Corporations

Indiana corporations may receive 50% credit for gifts, not to exceed 10% of the companys adjusted gross income tax or $1,000, whichever is less. For more details, please reference this information bulletin from the Indiana Department of Revenue website.

*The SECURE Act increased the age when required minimum distributions apply from age 70 ½ to age 72. Benefactors can still begin making IRA charitable rollovers at age 70 ½.

The University of Notre Dame is an educational institution and does not provide tax, legal, or financial advice. Any document or information shared by our staff is intended to be educational. Notre Dame strongly encourages all of our benefactors to seek counsel from their own legal and financial advisors. Please know that any information or documents shared by Notre Dame cannot be used to avoid tax-related penalties. Past performance of endowment investments does not guarantee future performance.

Registered Retirement Savings Plan Deduction

Deducting your RRSP contributions reduces your net income, which means youre taxed on a smaller amount of money.

To get the most tax savings, you dont need to deduct all your contributions in the same year. Instead, you can deduct just the amount you need to reduce your tax liability or get the maximum refund. You can then carry forward any undeducted contributions to deduct in later years when you might be making more money.

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The Charitable Deduction Can Be Quite Lucrative

The tax deduction for charitable contributions is one of the biggest tax breaks used by Americans. For the 2016 tax year, the most recent for which finalized data is available, more than 33 million Americans who itemized claimed a total of $221.6 billion in charitable contributions.

Taxpayers can generally deduct all donations to qualifying organizations. And, the limit is high — for most donations, the deduction is capped at 60% of adjusted gross income, or AGI.

What’s New For Charitable Donations To Schools In 2020

You may recall that charitable donations didn’t really impact your tax return unless you were itemizing all of your deductions in previous years. If your itemized deductions were less than the standard deduction, it didn’t make sense to bother claiming your charitable deductions. However, the CARES Act put new rules in place that make it possible for people who claim the standard deduction to also claim extra deductions for charitable giving.

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Yes, people who take the standard deduction for 2020 can still deduct charitable giving for the first time in years. If you take the standard deduction on your 2020 tax return, you can take advantage of a newly introduced above-the-line deduction for up to$300 in cash donations made to charitable organizations. If you gave to a school this year, get out those receipts to add the total to your deduction.

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Knowing How To Properly Deduct Charitable Donations Can Lower Your Taxable Income And Increase Your Tax Refund If Youre Owed One

When donating to charity, you might not expect to get something in return other than good feelings. But your good deed could also net you a tax deduction. And thanks to the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, more people will be able to reap the tax benefits of donating to charity.

The CARES Act aims to boost charitable contributions by creating a small above-the-line tax break for annual cash contributions starting in 2020. It also allows itemizers to deduct much more of their charitable contributions for the 2020 tax year.

Deducting a charitable donation isnt always easy, though. Depending on how you donate and how much, different rules apply. So, its important to know how to do it properly and to keep records in case you get audited. Here are some tips to get you started.

What is the standard deduction for 2019 and for 2020?

For the 2019 tax year, single filers can take a standard deduction of $12,200. Couples married filing jointly can take a standard deduction of $24,400, and people filing as head of household get a standard deduction of $18,350. For tax year 2020, those amounts rise to $12,400 for single filers, $24,800 for joint filers and $18,650 for heads of household.

Ira Charitable Rollover Gifts

If you are 70 ½ years of age* or older you can make a qualified charitable distribution of up to $100,000 directly to Notre Dame from a traditional Individual Retirement Account and avoid reporting the income. To make an IRA Charitable Rollover gift to Notre Dame, contact your IRA custodian and ask that your distribution be a charitable rollover to Notre Dame and include your name, address and how you would like the gift allocated in the transfer.

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Temporary Suspension Of Limits On Charitable Contributions

In most cases, the amount of charitable cash contributions taxpayers can deduct on Schedule A as an itemized deduction is limited to a percentage of the taxpayers adjusted gross income . Qualified contributions are not subject to this limitation. Individuals may deduct qualified contributions of up to 100 percent of their adjusted gross income. A corporation may deduct qualified contributions of up to 25 percent of its taxable income. Contributions that exceed that amount can carry over to the next tax year. To qualify, the contribution must be:

• a cash contribution
• made to a qualifying organization
• made during the calendar year 2020

Contributions of non-cash property do not qualify for this relief. Taxpayers may still claim non-cash contributions as a deduction, subject to the normal limits.

The Coronavirus Tax Relief and Economic Impact Payments page provides information about tax help for taxpayers, businesses, tax-exempt organizations and others including health plans affected by coronavirus .

Temporary Increase In Limits On Contributions Of Food Inventory

There is a special rule allowing enhanced deductions by businesses for contributions of food inventory for the care of the ill, needy or infants. The amount of charitable contributions of food inventory a business taxpayer can deduct under this rule is limited to a percentage of the taxpayers aggregate net income or taxable income. For contributions of food inventory in 2020, business taxpayers may deduct qualified contributions of up to 25 percent of their aggregate net income from all trades or businesses from which the contributions were made or up to 25 percent of their taxable income.

The Coronavirus Tax Relief and Economic Impact Payments page provides information about tax help for taxpayers, businesses, tax-exempt organizations and others including health plans affected by coronavirus .

This article generally explains the rules covering income tax deductions for charitable contributions by individuals. You can find a more comprehensive discussion of these rules in Publication 526, Charitable Contributions PDF, and Publication 561, Determining the Value of Donated Property PDF. For information about the substantiation and disclosure requirements for charitable contributions, see Publication 1771 PDF. You can obtain these publications free of charge by calling .

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Types Of Charitable Contributions That Are Deductible

• Donations to religious organizations

• Donations to homeowners associations
• The cost of lottery, raffle, or bingo tickets, even for fundraisers

Different types of charitable donations have their own set of tax rules. Luckily, the IRS provides a comprehensive guide on charitable contributionsto help you navigate any uncharted tax territory.

Can An Llc Make Charitable Contributions

A company that wants to file as an S corporation, a corporation or a partnership must comply with the Internal Revenue Service requirements. When an LLC contributes to a charitable organization, it has the right to do so as long as the beneficiary is eligible under IRS regulations and the contributions are accounted for properly.

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Is Money Donated To A University Tax Deductible

In the case of a cash donation to the university, your deduction is simple: deduct the level of the gift you made. In the case of a property donation, you can deduct the fair market value of the property. Unless its sold by the university to raise money, youre only allowed to deduct the amount paid.

Cash Donations Less Than $250

You must prove the donation amount if you want to deduct it with one of these:

• Receipt
• Bank or credit union statements
• Canceled checks

• Date
• Donation amount

For donations you made by payroll deduction, you can prove your donations if you have both of these:

• Document showing the amount withheld, like a pay stub or W-2 from your employer
• Pledge card or other document from the organization. It must state that they dont provide goods or services for donations made by payroll deduction.

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Attention College Athletics Fans

While the Tax Cuts and Jobs Act left the charitable deduction largely untouched, it did make one significant cut.

Previously, if you donated money to a college or university, and in exchange for your donation you got the right to purchase athletic tickets, the donation was 80% deductible. So, if you made a $1,000 donation to a university’s athletic department, you were allowed to treat $800 of that amount as a charitable deduction. Obviously, the cost of the athletic tickets themselves were never deductible, but this was still a big tax deduction for many Americans.

Under the new tax law, this deduction is gone. Beginning with the 2018 tax year , this type of charitable donation does not qualify for the deduction at all.

To be perfectly clear, a charitable deduction is still allowed if you donate to a college or university in most cases. For example, I give money to my alma mater’s theater department every year, and that’s still deductible. The new rule only applies if you receive the specific benefit of the right to purchase athletic tickets as a result of the donation.