Gifts of cash are fully deductible for federal and state income tax purposes. This means that if your combined federal and state income tax rate is 40 percent, then every $1,000 you donate to AEI costs you only $600 in after-tax income. The only limitation is that total charitable deductions may not exceed 50 percent of your adjusted gross income in the year the gift is made (but with a five-year carryover for the unused portion of your gift).