College Donations Tax Deductions
One of the major reasons so many colleges and universities receive large donations from wealthy alumni and others is that these donations are tax deductible. So if you have a very good year and decide to make a big donation to your alma mater, you can protect a large amount of your income that year from taxes, as you will pay no income tax at all on the entire amount the donation (with a couple of restrictions).
Background of Tax-Deductible Higher Education Donations
Donations to colleges and many other nonprofit organizations are tax deductible on the premises that the activities of these organizations (education, support of the aged, handicapped and so forth) benefit the general public. Note that only donations to IRS-approved tax-exempt educational institutions are tax deductible.
No-Benefit Donations are 100 Percent Tax Deductible
Any donations (up to 50 percent of your adjusted gross income) you make to a college or university that have no strings attached and that you receive no benefits from are generally considered 100 percent deductible.
Ticket or Other Benefit-Related Donations Are Only 80 Percent Deductible
It has become common practice for colleges and universities to require alumni and others wishing to purchase season athletic tickets and the like to meet certain minimum donation requirements just to be eligible to purchase the tickets. In response to this trend, the IRS has decided that only 80 percent of the value of any donations related to tickets or other benefits is tax deductible.
Max of 50 Percent of Adjusted Gross Income Is Tax Deductible
There are limits to the amount you can deduct. The rule of thumb is that your annual contributions to colleges and universities cannot exceed 50 percent of your adjusted gross income.
Controversy About Donations to College Athletics vs. Academics
The reason that donations to college athletics programs are tax deductible is because policy makers have enshrined the idea that college sports contribute to the educational purposes of higher education by contributing to the overall betterment of the students' educational experience. And while it is fair to say that college athletics do provide some benefit to the institution as a whole, the fact that they receive a disproportionately large and growing percentage of donations to colleges is problematic. According to the Chronicle of Higher Education, alumni donations for academic programs at Division I-A schools have been dropping recently. The report stated "contributions to sports programs are eating up an ever-larger share of donations to colleges," from just 14 percent at these schools in 1998 to 26 percent by 2003 (with no signs of a change in the trend).
Tags: colleges universities, adjusted gross, adjusted gross income, alumni others, college athletics