Can a large charitable gift be deducted in one year?
Key takeaway
A large charitable gift is often not deductible in one year. The IRS limits deductions by the type of property and by a percentage of adjusted gross income, and contributions above a limit generally carry forward. Capital gain property is generally deductible at fair market value, while ordinary income property is generally limited to basis.
Type of property sets the amount
The IRS says deductions for ordinary income property are generally limited to fair market value minus the ordinary income or short-term capital gain that a sale at fair market value would produce. That usually limits the deduction to basis.
Capital gain property generally may be deducted at fair market value, subject to listed exceptions that require reducing the value by potential long-term capital gain.
Percentage limits
Two separate 30 percent limits may apply to contributions. One covers capital gain property given to a 50 percent limit organization, and the other covers other contributions. Total contributions under a 30 percent limit never exceed 50 percent of adjusted gross income.
A grantor charitable lead trust's lead interest is for the charity's use, so the individual's deduction is generally limited under section 170(b)(1)(B) to 30 percent of the taxpayer's contribution base.
Carryovers
Charitable contribution carryovers generally may be deducted over the next 5 years. Qualified conservation contribution carryovers may be carried forward for 15 years.