Key Term

What is Qualified Charitable Contribution?

Definition

A qualified charitable contribution is a donation made to an IRS-approved 501(c)(3) organization or other eligible entity that meets specific requirements set by the Internal Revenue Service. These contributions can be in the form of cash, property, securities, or other assets, and must be made to organizations that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals.

Significance

Understanding qualified charitable contributions is crucial for both donors and charitable organizations because these donations are generally tax-deductible for the donor when itemizing deductions on their tax return. This tax benefit serves as an important incentive for charitable giving and helps sustain the nonprofit sector. For donors, ensuring their contributions qualify allows them to maximize their tax advantages while supporting causes they care about, potentially enabling them to give more generously. Organizations must maintain their qualified status to continue receiving these contributions, which often represent a significant portion of their funding.