If you are giving to a public charity (501(c)3) or private foundation, you can deduct up to 50% of your Adjusted Gross Income as charitable donations. If you give away more than 50% of this year’s income, you cannot deduct it this year, but you can carry it forward toward next year’s charitable deduction limit.
You can carry forward this giving for up to 5 years, and you only get to use the carry forward amount as a deduction on your taxes after you count the money given away in the current year.
To explain this, let’s use an example:
Let’s say your Adjusted Gross Income (line 38 of form 1040) for 2015 was $100,000 and you gave away $70,000 to your favorite public charity. You could deduct $50,000 of this donation on your 2015 taxes and you would carry $20,000 forward (expiring in 2020).
In 2016 let’s say you give away $40,000 out of your Adjusted Gross Income of $100,000. You would deduct the $40,000 you gave this year plus $10,000 of the carry forward amount from last year. Now you have a charitable deduction carry forward of $10,000, expiring in 2020.
You have to use the current year’s money toward “filling up” your charitable donation deduction before you can use any carried forward deduction amount, so take that into account when you are giving money (hopefully in the form of appreciated securities) to charity.
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