While charitable giving warms the soul, it may also be a practical approach to saving on your taxes. When planning your giving, it is important to consider that your income may affect your eligibility to claim a deduction on your tax return. There are several limitations associated with the size of your adjusted gross income (AGI), with caps on total charitable deductions for any one year, potentially ranging from 20% up to a maximum of 50% of AGI. Deductible amounts above specified limits may be carried forward for up to five additional, consecutive tax years. Higher income donors must also be wary of restrictions on total itemized deductions, which are gradually phased out above certain levels of AGI.

In general, charities are divided into two categories: public charities and private foundations. Gifts given to different types of charities are subject to different restrictions on valuation and deductibility. Similar gifts made in different ways will yield remarkably different results from a tax planning perspective. Furthermore, the type of gift, or property, may affect tax treatment.

The Internal Revenue Code (IRC) generally classifies property according to a four-tier system: 1) ordinary income property, 2) short-term capital gain property, 3) long-term capital gain property, and 4) tax-free property. Property is also classified as being either intangible property (stocks, bonds, mutual funds, etc.) or tangible personal property (artwork, collectibles, jewelry, etc.). Learning the many facets of charitable giving may best serve you and your favored charity.