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The end of the year is near, and that's when charities — and consumers — make a push for charitable giving.
What is a charitable donation?
A charitable donation is a gift money or goods to a tax-exempt organization that can reduce your taxable income.
Is charitable giving tax-deductible?
In general, you can deduct up to 60% of your adjusted gross income via charitable donations, but you may be limited to 20%, 30% or 50% depending on the type of contribution and the organization.
The deduction limit applies to all donations you make throughout the year, no matter how many organizations you donate to. Contributions that exceed the limit can often be deducted on your tax returns over the next five years — or until they’re gone — through a process called a carryover.
To claim a deduction for charitable donations on your taxes, you must have donated to an IRS-recognized charity and received nothing in return for your gift. Donated to a friend's GoFundMe? That is typically not tax-deductible.
» Learn more about crowdfunding and taxes
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How tax-deductible donations work
1. Donate to a qualifying organization
Your charitable giving will qualify for a tax deduction only if it goes to a tax-exempt organization, as defined by section 501(c)(3) of the Internal Revenue Code. Before you donate, ask the charity how much of your contribution will be tax-deductible.
Examples of qualified institutions include religious organizations, the Red Cross, nonprofit educational agencies, museums, volunteer fire companies and organizations that maintain public parks.
An organization can be nonprofit without 501(c)(3) status, which can make it tricky to ensure your charity of choice counts. You can verify an organization’s status with the IRS Exempt Organizations Select Check tool.
Gifts to family or friends are not considered tax-deductible and may be subject to the gift tax.
» MORE: How donor-advised funds work
2. Document your charitable contributions
Keep track of your tax-deductible donations, no matter the amount. If you made a monetary contribution, qualifying documentation includes a bank statement, a credit card statement and a receipt from the charity (including date, amount and name of the organization) or a canceled check.
If you made a contribution as an automatic deduction from your paycheck through your employer, keep copies of your W-2 or pay stubs showing the amount and date of your donation.
You’ll need additional documentation in these circ*mstances:
Cash or property donations worth more than $250: The IRS requires you to get a written letter of acknowledgment from the charity. It must include the amount of cash you donated, whether you received anything from the charity in exchange for your donation, and an estimate of the value of those goods and services. You must receive the letter of acknowledgment by the date you file your taxes (see the tax deadline here) for the year you made the contribution.
If you deduct at least $500 worth of noncash donations: Fill out Form 8283 if you’ll deduct at least $500 in donated items. Additionally, you must attach an appraisal of your items to the form if they’re worth more than $5,000 total.
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3. Don’t miss out on tax deductions for volunteering
IRS rules don’t let you deduct the value of your time or service, but expenses related to volunteering for a qualified organization can be counted as tax-deductible donations.
Expenses must be directly and solely connected to the volunteer work you did; not previously reimbursed; and not personal, living, or family expenses.
Your tax-deductible donations can include mileage you drive to charitable events and volunteer opportunities, or mileage you used to bring items to a donation site.
You can either deduct your actual expenses using receipts for gas and similar costs, or you can take the standard mileage deduction.
Keep your receipts if you plan to deduct your actual expenses; you may need them if you're audited.
4. Keep the deadline in mind
For your donation to be considered tax-deductible when you file, it must have been made by the end of that corresponding tax year. For example, you have until Dec. 31, 2023, to make donations you want to claim on your 2023 tax return, which gets filed by April 2024.
Per the IRS, the delivery date for a donation is determined as follows:
Check: The day the check was mailed, not received.
Credit card: The day the charge was made/processed, not when the bill was paid.
Stock: The day the broker transfers the gift to the charity.
Option: The day the option is exercised by the charity.
Claiming tax-deductible donations on your tax return
Generally, when you file your tax return every year, you'll need to itemize your deductions in order to claim tax-deductible donations to charity. That means filling out Schedule A along with the rest of your tax return.
Itemizing can take more time than if you just take the standard deduction, and it may require more expensive tax software or create a higher bill from your tax preparer. Plus, if your standard deduction is more than the sum of your itemized deductions, it might be worth it to abandon itemizing and take the standard deduction instead. If you abandon itemizing, however, you abandon taking the deduction for what you donated.
Here are the standard deduction amounts by filing status. Again, if your standard deduction is more than the sum of your itemized deductions, it might be worth it to skip itemizing (and thus skip claiming those tax-deductible donations) and take the standard deduction instead.
Filing status | 2023 standard deduction |
|---|---|
Single | $13,850. |
Married, filing separately | $13,850. |
Married, filing jointly; qualified widow/er | $27,700. |
Head of household | $20,800. |
» MORE: How to know when to itemize or take the standard deduction
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Charitable deductions 2023
A temporary tax law ushered in by the Coronavirus Aid, Relief and Economic Security Act (CARES Act) allowed taxpayers to claim up to $600 in cash donations to qualified charities on their taxes without having to itemize for tax years 2020 and 2021. This tax benefit has expired and is no longer available.
If you plan to claim itemized deductions for charitable contributions on your tax return, the deduction limit has reverted back to a maximum of 60% of your AGI. As noted above, the exact percentage you can claim is influenced by the type of contribution.
Frequently asked questions
Can non-itemizers deduct charitable contributions on their taxes?
No. In 2020 and 2021, a temporary tax law allowed non-itemizers to deduct up to $600 (married filing jointly) and $300 (all other filers) of qualified charitable cash contributions on their taxes. This provision has expired.
How much can you donate to charity for a tax deduction?
Generally, itemizers can deduct 20% to 60% of their adjusted gross income for charitable donations. The exact percentage depends on the type of qualified contribution as well as the charity or organization. Contributions that exceed the limit may be deductible in future years.
I'm a financial expert with in-depth knowledge of personal finance, taxes, and charitable giving. My expertise is grounded in both theoretical understanding and practical experience in navigating the complexities of financial matters. Now, let's delve into the concepts discussed in the article you provided:
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Charitable Donations:
- A charitable donation involves giving money or goods to a tax-exempt organization.
- It can reduce your taxable income.
- Generally tax-deductible, allowing you to deduct up to 60% of your adjusted gross income via charitable donations.
-
Qualifying Organizations:
- Donations qualify for a tax deduction only if they go to a tax-exempt organization under section 501(c)(3) of the Internal Revenue Code.
- Examples of qualified institutions include religious organizations, the Red Cross, nonprofit educational agencies, museums, volunteer fire companies, and organizations maintaining public parks.
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Documentation of Contributions:
- Keeping track of tax-deductible donations is crucial.
- Documentation includes bank or credit card statements, receipts from the charity, canceled checks, and, for certain thresholds, a written letter of acknowledgment from the charity.
-
Tax Deductions for Volunteering:
- While the value of time or service is not deductible, expenses related to volunteering can be counted as tax-deductible donations.
- Deductible expenses include mileage to charitable events and volunteer opportunities.
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Deadline for Deductible Donations:
- For a donation to be tax-deductible, it must be made by the end of the corresponding tax year.
- The IRS determines the delivery date based on the type of donation (check, credit card, stock, option).
-
Claiming Tax-Deductible Donations:
- Generally, you need to itemize deductions on your tax return to claim tax-deductible donations to charity.
- Itemizing requires filling out Schedule A, and it may be more time-consuming than taking the standard deduction.
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Standard Deduction Amounts (2023):
- Single: $13,850
- Married, filing separately: $13,850
- Married, filing jointly; qualified widow/er: $27,700
- Head of household: $20,800
-
Changes Due to CARES Act:
- The CARES Act allowed taxpayers to claim up to $600 in cash donations to qualified charities without itemizing for tax years 2020 and 2021.
- This benefit has expired, and the deduction limit for itemizers is back to a maximum of 60% of adjusted gross income.
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Frequently Asked Questions:
- Non-itemizers cannot deduct charitable contributions on their taxes.
- The temporary provision allowing non-itemizers to deduct up to $600 has expired.
- Itemizers can generally deduct 20% to 60% of their adjusted gross income for charitable donations, depending on the type of contribution and the charity.
If you have any specific questions or need further clarification on these concepts, feel free to ask.
