7.5 Charitable Contributions

Enrolled Agent EA

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1 Part 1, Chapter 1: Tax Return Basics & Filing Requirements

1.1 Form 1040 Overview & Structure 1.2 Form 1040-SR for Seniors 1.3 Who Must File (Income Thresholds) 1.4 Filing Deadlines & Extensions (Form 4868) 1.5 Penalties: Failure to File vs. Failure to Pay 1.6 Sources of Tax Information (W-2s, 1099s, K-1s) 1.7 Preparer Due Diligence Requirements 1.8 Amended Returns (Form 1040-X)

2 Part 1, Chapter 2: Filing Status & Dependents

2.1 Single & Married Filing Jointly 2.2 Married Filing Separately 2.3 Head of Household Requirements 2.4 Qualifying Surviving Spouse 2.5 Qualifying Child Test (5 Tests) 2.6 Qualifying Relative Test (4 Tests) 2.7 SSN, ITIN & Residency Status

3 Part 1, Chapter 3: Wages & Employee Compensation

3.1 W-2 Income & Withholding 3.2 Employee vs. Independent Contractor 3.3 1099-NEC, 1099-MISC & 1099-K Reporting 3.4 Fringe Benefits (Taxable vs. Non-Taxable) 3.5 Stock Options (ISO vs. NQSO) 3.6 Special Categories (Clergy, Military, Foreign)

4 Part 1, Chapter 4: Interest, Dividends & Other Income

4.1 Taxable vs. Tax-Exempt Interest 4.2 US Savings Bonds & OID 4.3 Ordinary vs. Qualified Dividends 4.4 Schedule B Requirements 4.5 Rental & Royalty Income Basics 4.6 Alimony, Gambling & Other Income 4.7 Cancelled Debt & Form 1099-C 4.8 Net Operating Loss (NOL)

5 Part 1, Chapter 5: Capital Gains & Property Transactions

5.1 Capital vs. Non-Capital Assets 5.2 Cost Basis Calculation 5.3 Inherited & Gifted Property Basis 5.4 Short-Term vs. Long-Term Gains 5.5 Capital Gains Tax Rates (0%, 15%, 20%) 5.6 Netting & the $3,000 Loss Limit 5.7 Wash Sales & Related Party Rules 5.8 Sale of Primary Residence (Section 121) 5.9 Installment Sales (Form 6252) 5.10 Like-Kind Exchanges (Section 1031)

6 Part 1, Chapter 6: Adjustments to Income

6.1 Educator Expenses & HSA Contributions 6.2 Self-Employment Tax Deduction 6.3 IRA Contributions (Traditional) 6.4 Student Loan Interest Deduction 6.5 Alimony Paid (Pre-2019 Divorces) 6.6 Other Adjustments & New OBBBA Deductions (Tips, Overtime, Auto Loan, Senior Bonus)

7 Part 1, Chapter 7: Deductions (Standard & Itemized)

7.1 Standard Deduction by Filing Status 7.2 Medical & Dental Expenses (7.5% Floor) 7.3 State & Local Taxes (SALT $40K Cap) 7.4 Mortgage Interest Deduction 7.5 Charitable Contributions 7.6 Casualty & Theft Losses 7.7 QBI Deduction (Section 199A)

8 Part 1, Chapter 8: Tax Calculation & Credits

8.1 Tax Tables & Rate Schedules 8.2 Alternative Minimum Tax (AMT) 8.3 Self-Employment Tax Calculation 8.4 Child Tax Credit & Additional CTC 8.5 Earned Income Tax Credit (EITC) 8.6 Education Credits (AOC & LLC) 8.7 Child & Dependent Care Credit 8.8 Other Credits (Saver's, Premium Tax)

9 Part 1, Chapter 9: Retirement Accounts & Social Security

9.1 Traditional vs. Roth IRA 9.2 401(k), 403(b) & TSP Basics 9.3 SEP-IRA & SIMPLE IRA 9.4 Required Minimum Distributions (RMDs) 9.5 Early Withdrawal Penalties & Exceptions 9.6 Social Security Taxation

10 Part 1, Chapter 10: Specialized Individual Returns

10.1 Estate Tax (Form 706) 10.2 Gift Tax (Form 709) 10.3 Foreign Income (Form 2555) 10.4 FBAR & FATCA Reporting 10.5 Farm Income (Schedule F) 10.6 Disaster Area Rules

11 Part 2, Chapter 11: Business Entity Types

11.1 Overview of Entity Types 11.2 State Law vs. Tax Classification 11.3 Entity Selection: Reasonable Comp & QBI 11.4 Form 8832 & Rev. Proc. 2009-41 11.5 LLC Deep Dive: Spouses & EINs 11.6 Changing Status: The 60-Month Rule

12 Part 2, Chapter 12: Starting a Business

12.1 Hobby vs. Business (Profit Motive) 12.2 Employer Identification Number (EIN) 12.3 Tax Year Selection 12.4 Recordkeeping Requirements 12.5 Statute of Limitations 12.6 Related Party Transactions 12.7 Start-Up Costs, Entity Choice & OBBBA Business Changes (2025)

13 Part 2, Chapter 13: Worker Classification & Payroll

13.1 Employee vs. Independent Contractor 13.2 Common Law Test (Behavioral, Financial, Relationship) 13.3 Statutory Employees & Non-Employees 13.4 Form 941 & Payroll Deposits 13.5 Trust Fund Recovery Penalty 13.6 FUTA & Unemployment Taxes

14 Part 2, Chapter 14: Accounting Methods & Income

14.1 Cash vs. Accrual Method 14.2 Hybrid Methods & Changes 14.3 Inventory & COGS 14.4 Gross Receipts & Income Recognition 14.5 Constructive Receipt 14.6 Form 1099 Reporting Requirements 14.7 §163(j) Business Interest Expense Limitation 14.8 §174 Research & Experimental Expenditures

15 Part 2, Chapter 15: Depreciation & Asset Treatment

15.1 MACRS Basics & Recovery Periods 15.2 Mid-Month, Mid-Quarter, Half-Year Conventions 15.3 Section 179 Expense Deduction 15.4 Bonus Depreciation 15.5 Listed Property Rules 15.6 Amortization of Intangibles 15.7 Depletion 15.8 Disposition of Business Assets

16 Part 2, Chapter 16: Business Deductions

16.1 Ordinary & Necessary Test 16.2 Business Travel Expenses 16.3 Business Meals (50% Limitation) 16.4 Business Use of Vehicle 16.5 Home Office Deduction 16.6 Business Interest Limitation (163(j)) 16.7 Business Bad Debts

17 Part 2, Chapter 17: Business Credits & Fringe Benefits

17.1 General Business Credit Overview 17.2 R&D Credit & Disabled Access Credit 17.3 Small Employer Health Insurance Credit 17.4 Fringe Benefit Rules 17.5 Cafeteria Plans (Section 125) 17.6 Achievement Awards & Other Benefits

18 Part 2, Chapter 18: Sole Proprietorships

18.1 Schedule C Overview 18.2 Calculating Net Profit/Loss 18.3 Self-Employment Tax (Schedule SE) 18.4 Estimated Tax Payments 18.5 Hobby Loss Rules

19 Part 2, Chapter 19: Partnerships

19.1 Partnership Formation 19.2 Partner's Basis Calculation 19.3 Form 1065 Overview 19.4 Schedule K-1 (Partner's Share) 19.5 Guaranteed Payments 19.6 Partnership Distributions 19.7 At-Risk & Passive Activity Rules 19.8 Partnership Termination & Liquidation

20 Part 2, Chapter 20: C Corporations

20.1 Form 1120 Overview 20.2 Corporate Tax Rate (21%) & CAMT 20.3 Accumulated Earnings Tax 20.4 Dividends Received Deduction 20.5 Earnings & Profits (E&P) 20.6 Corporate Distributions, Dividends & Stock Redemptions 20.7 §351 Transfers, §1032, §1202 QSBS & Other Corporate Provisions 20.8 Corporate Liquidation

21 Part 2, Chapter 21: S Corporations

21.1 S Election Requirements (Form 2553) 21.2 Form 1120-S Overview 21.3 Shareholder Basis Calculation 21.4 Reasonable Compensation 21.5 S Corporation Distributions 21.6 Built-In Gains Tax & Termination

22 Part 2, Chapter 22: Specialized Business Returns

22.1 Trusts & Estates (Form 1041) 22.2 Simple vs. Complex Trusts 22.3 Distributable Net Income (DNI) 22.4 Tax-Exempt Organizations (Form 990) 22.5 Retirement Plans (Form 5500) 22.6 Qualified Retirement Plans Overview 22.7 Farm Taxation 22.8 Rental Real Estate Activities

23 Part 3, Chapter 23: Practice Before the IRS

23.1 What is Practice Before the IRS? 23.2 Who Can Practice (Full Rights) 23.3 Limited Practice Rights (AFSP, Unenrolled) 23.4 Special Relationships (Family, Employees) 23.5 PTIN Requirements 23.6 Circular 230 Overview 23.7 Office of Professional Responsibility (OPR)

24 Part 3, Chapter 24: Becoming & Maintaining EA Status

24.1 Two Paths to EA (Exam vs. IRS Experience) 24.2 Application Process (Form 23) 24.3 Background & Compliance Checks 24.4 Renewal Requirements (Form 8554) 24.5 Continuing Education Requirements 24.6 Inactive Status & Termination

25 Part 3, Chapter 25: Practitioner Duties (Circular 230)

25.1 Due Diligence Requirements 25.2 Knowledge of Client's Omission 25.3 Conflict of Interest Rules 25.4 Fee Requirements (Contingent, Unconscionable) 25.5 Advertising & Solicitation Rules 25.6 Tax Return Position Standards 25.7 Written Advice Standards 25.8 Sanctions & Penalties for Violations

26 Part 3, Chapter 26: Power of Attorney & Authorization

26.1 Form 2848 (Power of Attorney) 26.2 CAF (Centralized Authorization File) 26.3 Form 8821 (Tax Information Authorization) 26.4 Third-Party Designee 26.5 Signing Returns for Taxpayers 26.6 Client Confidentiality & Privilege 26.7 Representing Clients in Audits (Examination) 26.8 Appealing IRS Decisions 26.9 Collection Representation

27 Part 3, Chapter 27: Legal Authority & Research

27.1 Hierarchy of Tax Authority 27.2 Internal Revenue Code 27.3 Treasury Regulations 27.4 Revenue Rulings & Procedures 27.5 Court Cases & Precedent 27.6 Statutes of Limitations

28 Part 3, Chapter 28: Specific Representation Issues

28.1 Trust Fund Recovery Penalty (TFRP) 28.2 Innocent Spouse Relief (Form 8857) 28.3 Injured Spouse Allocation (Form 8379) 28.4 Penalty Abatement (FTA & Reasonable Cause) 28.5 Taxpayer Advocate Service (TAS) 28.6 Freedom of Information Act (FOIA)

29 Part 3, Chapter 29: Final Review & Exam Strategy

29.1 Exam Structure & Logistics (2026-2027) 29.2 The "Clock" of Representation (Master Deadlines) 29.3 Ethics vs. Law (Sanctions & Penalties) 29.4 Final Mock Review & Exam Strategy

30 Part 3, Chapter 30: Filing Process & E-File

30.1 E-File Requirements (The "More Than 10 Returns" Rule) 30.2 ERO Responsibilities 30.3 EFIN & Application Process 30.4 Form 8879 (Signature Authorization) 30.5 Record Retention & Data Security (WISP) 30.6 Preparer Penalties (Filing Specific)

7.5 Charitable Contributions

Key Takeaways Explain This Topic AI

Cash to public charities is limited to 60% of AGI in 2025; capital gain property (FMV) is limited to 30%; private foundations face 30% (cash) or 20% (capital gain) limits

Qualified organizations include 501(c)(3) entities, churches (no IRS recognition required), and federal/state/local governments acting for public purposes

Property donations: long-term capital gain property generally deducted at FMV; ordinary income / short-term capital gain property limited to lesser of FMV or basis

Substantiation thresholds: $250+ requires written acknowledgment; >$500 non-cash requires Form 8283 Section A; >$5,000 non-cash requires qualified appraisal and Form 8283 Section B

Qualified Charitable Distributions (QCDs) from IRAs let taxpayers age 70½+ donate up to $108,000 in 2025 directly to charity, excluded from gross income; counts toward RMD

Last updated: October 2026

Charitable contributions remain a core itemized deduction topic. The 2025 rules are largely unchanged from 2024, but the One Big Beautiful Bill Act (OBBBA) imposes significant changes beginning tax year 2026 —candidates must know what applies in 2025 versus what is coming.

Who Can Deduct Charitable Contributions (2025)?

Only taxpayers who itemize can claim a Schedule A charitable contribution deduction in 2025. The 2025 standard deductions are:

• $15,750 for Single or MFS
• $31,500 for MFJ or QSS
• $23,625 for HoH

Coming in 2026 (NOT 2025): OBBBA creates a new charitable deduction after AGI for non-itemizers: $1,000 for Single filers and $2,000 for MFJ filers for cash contributions to public charities. This does not apply to the 2025 tax year. The pandemic-era above-the-line deduction (2020-2021) expired and has not been restored for 2025.

Qualified Organizations

50% Limit Organizations (Public Charities):

• 501(c)(3) organizations — charitable, religious, educational, scientific, or literary
• Churches, synagogues, mosques — automatically qualify without formal IRS recognition
• Federal, state, and local governments — for public purposes
• Public colleges and universities
• Hospitals and medical research organizations
• Donor-advised funds (subject to 60% cash limit)

30% Limit Organizations:

• Private non-operating foundations
• Veterans' organizations
• Fraternal societies (if used for charitable purposes)
• Nonprofit cemetery companies
• Non-Deductible Contributions

• Not Deductible Why
• Contributions to individuals Not a qualified organization
• Political organizations or candidates Not charitable
• Foreign organizations Generally not qualified (limited exceptions)
• Civic leagues, social clubs, labor unions 501(c)(4)/(5)/(6), not (c)(3)
• Homeowners associations Not charitable
• Value of time or services Only out-of-pocket expenses qualify
• Raffle or lottery tickets Gambling, not a gift
• Tuition paid to schools Payment for services
• Value of blood donated No cost basis
• AGI Limitations (2025)

• Type of Contribution 50% Limit Org (Public Charity) 30% Limit Org (Private Foundation)
• Cash 60% of AGI 30% of AGI
• Ordinary income property 50% of AGI (at basis) 30% of AGI (at basis)
• Capital gain property (long-term) 30% of AGI (at FMV) 20% of AGI
• Capital gain property (elected reduced) 50% of AGI (at basis) 30% of AGI (at basis)

Important Rules (2025):

Overall ceiling: 50% of AGI cannot be exceeded by total deductions in any one year (except cash to public charities at 60%)

• Apply limits in order: 60% → 50% → 30% → 20%
• Excess carries forward 5 years
• Use FIFO (first-in, first-out) for carryovers
• NO 0.5%-of-AGI floor for 2025 (the OBBBA floor begins in 2026)

Example: A taxpayer with $100,000 AGI donates $70,000 cash to her church (60% org). Deduction = $60,000 (60% × $100,000). The $10,000 excess carries forward up to 5 years.

Property Donations: FMV vs. Basis Rules

Long-Term Capital Gain Property (held > 1 year):

• Generally deduct Fair Market Value (FMV)
• Subject to 30% AGI limit for public charities
• Can elect basis instead, raising the limit to 50%

Ordinary Income Property / Short-Term Capital Gain Property (held ≤ 1 year):

• Deduct lesser of FMV or adjusted basis
• Includes inventory, artwork created by donor, short-term stocks

Depreciated Property (FMV < Basis):

Deduct FMV only —cannot deduct a loss

Tangible Personal Property — Special Rule:

• If charity's use is related to its exempt purpose: deduct FMV
• If charity's use is unrelated : deduct basis

Example: Artwork donated to a museum (related) vs. artwork donated to a homeless shelter for auction (unrelated)

Vehicles, Boats, Aircraft (over $500):

• If charity sells the vehicle: deduction limited to gross sales proceeds
• If charity uses the vehicle: may deduct FMV
• Requires Form 1098-C from charity within 30 days
• Substantiation Requirements (Unchanged for 2025)

• Contribution Amount Requirement
• < $250 cash Bank record, receipt, or written communication from charity
• < $250 non-cash Receipt from charity with description
• $250 or more Written acknowledgment from charity (contemporaneous)
• > $500 non-cash Above + Form 8283, Section A
• > $5,000 non-cash Above + Qualified appraisal + Form 8283, Section B (donee signs)
• > $500,000 non-cash Above + appraisal attached to return

Written Acknowledgment Must Include:

• Amount of cash and description of property
• Whether charity provided goods/services in return
• Good faith estimate of value of goods/services provided (or statement of intangible religious benefit)

Timing: Acknowledgment must be obtained by the earlier of :

• Date the tax return is filed, OR
• Due date (including extensions)

Appraisal Requirements (> $5,000):

• Qualified appraiser (not donor, donee, or party to the transaction)
• Appraisal made no earlier than 60 days before donation
• Appraisal received no later than return due date (including extensions)
• Exceptions: publicly traded securities, inventory, vehicles sold by charity
• Quid Pro Quo Contributions

When you receive something in return, the deductible amount is reduced by the FMV of the benefit .

Example: You pay $500 to attend a charity gala; the dinner has a FMV of $150. Deductible = $350.

Disclosure: Charities must provide written disclosure for quid pro quo contributions over $75 .

Token Exceptions (no reduction needed):

Small benefits like logo items costing the charity $13.00 or less when the contribution is $65.00 or more (2025 indexed thresholds; check current Rev. Proc.)

• Intangible religious benefits (masses, prayers)
• Carryover of Excess Contributions

Contributions exceeding AGI limits carry forward 5 years . Carryover retains its original character (cash vs. capital gain property) and is subject to the same percentage limits. Apply current-year contributions first; then carryovers FIFO.

Qualified Charitable Distributions (QCDs) — 2025

Requirements:

• Taxpayer must be age 70½ or older (this age threshold remains 70½ even though the RMD start age is 73)
• Distribution made directly from IRA to qualified charity
• Cannot go to donor-advised funds or private foundations

2025 Limits:

• Maximum $108,000 per individual (up from $105,000 in 2024 — inflation indexed)
• Married couples: each spouse may QCD up to $108,000
• One-time $54,000 election to fund a charitable gift annuity / charitable remainder trust through a QCD

Tax Benefits:

• Distribution excluded from gross income
• Counts toward Required Minimum Distribution (RMD)
• Beneficial even if standard deduction taken
• Reduces AGI (helps with IRMAA, Social Security taxation, NIIT)

Reduction Rule: QCD amount must be reduced by deductible IRA contributions made after age 70½.

LOOKING AHEAD — OBBBA Charitable Changes (Start 2026, NOT 2025)

These provisions do not apply to 2025 returns but EAs should know them so they can advise clients:

1. 0.5% AGI Floor on Itemized Charitable Contributions (2026+):

Only contributions in excess of 0.5% of AGI become deductible

Example: AGI $100,000 → first $500 of donations is non-deductible; the rest is deductible (still subject to 60%/30%/20% ceilings)

Floor amount lost cannot be carried forward as a deduction

2. Deduction After AGI for Non-Itemizers (2026+):

• Cash contributions to public charities only (no DAFs or private foundations)
• Up to $1,000 Single / $2,000 MFJ
• HoH/QSS amounts to be confirmed by IRS guidance

Bottom line for 2025 EA exam: Use the pre-OBBBA-floor rules — no 0.5% floor, no non-itemizer deduction. Mention the 2026 changes only as upcoming context.

EA Exam Tips

Commonly Tested:

• 60% / 30% / 20% limits — know which applies to which combo
• Cash vs. property — different rules
• Public charity vs. private foundation — different limits
• FMV vs. basis — when each applies
• Substantiation thresholds — $250, $500, $5,000 are key numbers
• QCD eligibility — age 70½ (NOT 73), 2025 limit $108,000
• OBBBA timing: the 0.5% floor and non-itemizer deduction start 2026 — do NOT apply them to 2025 returns

Watch for Traps:

• Donations to individuals are NEVER deductible
• Services/time cannot be deducted (only unreimbursed expenses)
• QCDs must be DIRECT to charity, not through donor
• 2025 has NO 0.5% AGI floor (that's a 2026 OBBBA change)
• 2025 has NO above-the-line charitable deduction for non-itemizers

Quick Memory Aid: "Sixty-Thirty-Twenty" — Cash to public = 60%, Property or private = 30%, Property to private foundations = 20%.