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- Donations to charity are tax deductible if you itemize your deductions.
- The recipient of your donation must have a special tax-exempt status called 501(c)(3).
- Gifts of cash, stockholdings, clothing and households goods, and even real estate are potentially tax deductible.
Taxpayers who donate to charitable causes can use a federal income tax deduction to reduce what they owe the IRS. However, only those who itemize their deductions can take advantage of it.
Since 2017 tax reforms, the number of people who itemize has dropped dramatically, making the charitable tax deduction all the more valuable to those who qualify.
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Can I reduce my taxes by donating to charity?
Some donations to 501(c)(3) organizations are deductible on your federal tax return, and potentially your state return too. This means you can subtract the value of the donation from your income, which may lead to a lower tax bill.
A 501(c)(3) is a tax-exempt organization registered with the IRS. Examples include religious and educational groups, civil and human rights groups, animal and child welfare organizations, private family nonprofits, and medical research groups.
"Donations can take the form of almost anything of value, and the fair market value most often determines the deduction amount," says H. Jeffrey Spivack, a CFP® professional and vice president of financial planning operations at Citizens Wealth Management.
Most people give cash to charity, in part because it's easy to report. But you can also donate big-ticket items such as a car or stock portfolio. Donating financial assets that have increased in value helps you avoid the capital gains tax and qualify for an income tax deduction.
One of the most efficient ways to donate to a charity is to give securities such as stocks that have appreciated in valuse, Spivack says.
"By donating appreciated securities held for more than one year, a taxpayer is donating up to 20% more than if they had sold the security and written a check," he says.
Who qualifies for tax deductible donations?
In order to qualify for the tax break, you have to itemize your deductions. In addition to charitable donations, common itemized deductions include mortgage interest, state and local taxes up to $10,000, and major medical expenses.
Few taxpayers itemize since the standard deduction — an amount that everyone automatically gets to claim against their income—increased substantially in 2018. The standard deduction for taxes due in April 2024 is $13,850 for single tax filers and $27,700 for married, joint filers.
If your standard deduction is higher than your total itemized deductions, you won't get any benefit from writing off any of your expenses, including any charitable donations.
Because of these rules, it can be difficult for married couples to deduct any of their charitable contributions. Their total itemized deductions would need to be at least double that of a single filer to eclipse the standard deduction.
"The decision about whether to use a standard or itemized deduction is based on which will provide the taxpayer a better benefit, so it may make sense to consider bunching multiple itemized deductions into a single year to obtain a more significant overall deduction, including the tax-deductible charitable contribution," Spivack says.
Tax rules for donations to charity
To get a deduction for your charitable donations, you need to follow specific IRS rules.
1. Donate to a tax-exempt organization
Only donations made to qualified organizations are eligible for the charitable tax deduction. These are companies that operate exclusively for charitable purposes and advertise as 501(c)(3), tax-exempt, or nonprofit organizations.
Donations to political parties, political-action committees, campaigns, or individual political candidates are not eligible for a tax deduction. Neither is money you give to individuals, whether directly or through online fundraisers.
For example, a donation to the American Red Cross for hurricane relief might be tax deductible (provided you meet other conditions), but a check made out to a specific family affected by the disaster is not.
Many people give cash or cash equivalents to charity. Other types of donations that may be eligible for a tax deduction include:
- Stocks and bonds
- Intellectual property, such as patents, copyrights, and trademarks
- Jewelry, coin, or stamp collections
- Clothing, appliances, electronics, furniture, and other household items that are in good condition or better
- Cars, boats, and airplanes
- Real estate and land
- Business inventory (special rules apply to food)
- 14 cents per mile when you drive your car while volunteering for a qualifying organization
2. Keep records
As with any tax matter, it's important to keep receipts of your charitable donations. Generally, the larger your donation, the more detailed your records should be.
For cash donations of less than $250, keep a copy of your bank statement, a canceled check, or a note from the organization to verify the date and size of your gift.
For cash or noncash donations of $250 or more, ask the organization for a receipt showing the estimated value of your donation.
3. Itemize your deductions
Charitable donations of any size for which you are seeking a tax deduction are reported on the tax form Schedule A, under the Gifts to Charity section.
For noncash donations of more than $500, you will need to attach Form 8283, which asks for details like your original purchase price. For donations above $5,000, you will need a professional to appraise the item. The organization that received your donation will also need to complete and sign part of the tax form.
There's one case where you may be able to essentially write off your charitable donations without itemizing your deductions, Spivack says. If you're age 70 and a half or older, you can redirect up to $100,000 a year from your IRA to a qualified charity in lieu of taking your required minimum distribution. Though the mechanics are slightly different from the charitable tax deduction, you still avoid paying income taxes on the amount you donate.
How much charitable donation is deductible in 2023?
The type of donation you make and the charity it goes to determine how much of it will be deductible.
In general, the tax deduction for cash contributions is capped at 60% of your adjusted gross income (AGI). Noncash donations, including property that has increased in value—i.e. capital gain property—are subject to 20%, 30%, and 50% limits.
If your total donations for the year exceed your AGI limit, you may be able to carry over the remainder and claim deductions during the next five years.
Tax deductible donation example
In 2023, a single taxpayer with $100,000 in annual income donated $7,000 to their community church and $1,000 to the Girl Scouts of America for a total of $8,000 in charitable contributions.
The standard deduction is $13,850, so the taxpayer needs an additional $5,850 in itemized deductions, such as mortgage interest or state and local taxes, to be able to claim the charitable tax deduction.
Say the taxpayer ends up with total itemized deductions of $18,000. That's higher than the standard deduction, so their taxable income becomes $82,000.
Tax deductible charitable donations frequently asked questions
How much does the IRS allow for charitable donations?
The amount of charitable donations that you can deduct on your tax return depends on the size of your gifts and the type of charity you donate to.
Are donations 100% tax deductible?
Charitable donations are only fully tax deductible if you itemize your deductions. Cash donations are generally capped at 60% of your adjusted gross income, while noncash contributions may be limited to 20%, 30%, or 50% of AGI. You may be able to carry over excess donations and claim a deduction for up to five years.
Do charitable donations reduce taxable income?
Charitable contributions can help reduce your taxable income, if you qualify. Donations are tallied alongside other itemized deductions and the total is subtracted from your AGI. The remaining amount is your taxable income.
Are donations worth claiming on taxes?
A charitable donation is an expense that's itemized on your tax return, along with other deductions like mortgage interest and state and local taxes. If your total itemized deductions eclipse your standard deduction, it's probably worth claiming them.