Foundation basics

Are contributions to private foundations tax deductible?

Yes, contributions to private foundations are generally tax-deductible. However, to benefit from these deductions, taxpayers must itemize deductions on their tax returns using Schedule A (Form 1040), forgoing the standard deduction. When you donate to a private foundation, which is technically a type of 501(c)(3) charitable organization, you can typically deduct the contribution from your taxable income, subject to various limitations and rules set forth by the Internal Revenue Service. There are, however, caps on the amount you can deduct. Specifically, cash donations to foundations are deductible up to 30% of your adjusted gross income (AGI), while contributions of appreciated property, like stocks and real estate, are capped at a 20% deduction of your AGI. If your contributions exceed these thresholds, the excess may be carried forward for up to five subsequent tax years.

When you donate non-cash items such as stocks or property to a private foundation, the tax deduction depends on how long you've owned the assets. If you've owned them for more than a year, you can usually deduct their current market value. If you've owned them for one year or less, your deduction is typically limited to what you originally paid for them. For contributions of $250 or more, a written acknowledgment from the foundation is required. For a more in-depth understanding of the tax benefits associated with private foundations, please refer to the discussion provided through the following tax-benefits link.

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Foundation basics