Charitable contributions continue to be relevant planning consideration for businesses and individuals, but deductibility varies based on taxpayer type and applicable statutory limitations. CPAs should be mindful of how these rules apply when advising clients on the timing and structure of charitable gifts.

C Corporations

For C corporations, the IRS provides that charitable contribution deductions are generally limited to 10% of taxable income for the year. Taxable income for this purpose is computed without regard to the charitable contribution deduction and certain other adjustments. Contributions in excess of the annual limitation may be carried forward, subject to the applicable rules.

As a result, corporate charitable giving should be evaluated in light of projected taxable income to determine whether contributions are likely to be deductible currently or deferred through carryforward.

Flowthrough Entities

For partnerships and S corporations, charitable contributions are treated as separately stated items and passed through to owners. The deduction is not taken at the entity level; instead, each owner determines deductibility on their individual return.

Because deductibility depends on the owner’s adjusted gross income and other applicable limitations under IRS IRC §170, Charitable, etc. contributions and gifts, entity-level charitable contributions may produce different tax outcomes among owners. In some cases, an owner may be unable to fully deduct their allocable share in the current year, resulting in a carry forward.

Individuals and Itemized Deductions

For individuals who itemize, charitable contribution deductions are subject to percentage limitations based on adjusted gross income, as detailed in IRS Publication 526. The IRS has reported that beginning in 2026, a 0.5 percent floor will apply to itemized charitable deductions, reducing the deductible amount by 0.5 percent of the taxpayer’s contribution base.

Practice Note

Finally, charitable contributions should be incorporated into overall tax planning rather than considered in isolation. Understanding entity-level treatment, owner-level limitations, and upcoming changes allows CPAs to help clients align charitable objectives with efficient tax outcomes.