Tax-Deductible Donations To Charitable Organizations: A Quick Guide

As you prepare to file your taxes, you may be wondering if your tax return should include your charitable donations – and whether they offer any tax benefits.

The answer: It depends. Eligible charitable donations can help you reduce your taxable income and consequently pay less in taxes. However, depending on the amount you would be deducting, you may be better off taking the standard deduction. To make it easier on yourself at tax season, explore this overview of what tax-deductible donations are, how they work and what counts as a tax-deductible donation.

What Are Tax-Deductible Donations?

Tax-deductible donations are gifts of cash, assets or property to a qualifying organization. As such, you won’t receive anything in return. However, if a donation is tax-deductible, you can itemize your donation amount on your tax return. This will reduce your taxable income and may even change your tax bracket.

If a taxpayer donated an asset or property, they can deduct the current fair market value to enjoy some legal tax savings.

How Do Tax-Deductible Donations Work?

Certain donations are tax-deductible and can reduce your taxable income. The deduction amount you can claim for charitable contributions is based on your adjusted gross income (AGI) – though some contributions aren’t subject to the limit, which means you can deduct up to 100% of your gross income.

Whether a donation counts as a deduction also depends on the type of organization you donated to.

Standard Deductions At A Glance

Since the standard deduction ranges from $13,850 to $27,700 for the 2023 tax year, most people will opt to take it rather than itemize. If your total deductions (including deductions for mortgage interest, charity and anything else that qualifies) would be higher than the standard deduction, itemizing is the best move. Otherwise, the standard deduction is best.

Here’s a quick overview of the standard deductions for tax years 2023 and 2024.

At A Glance: How To Get A Tax Deduction For Charitable Giving

If you’ve donated to charity this year and you’re planning to itemize, here’s a quick overview of how you might reduce your tax bill. If you’re unsure of what to do, consider using a tax preparer to verify that your deductions are legitimate.

1. Donate funds or goods to a qualifying charity.

2. Document your donation.

3. File your itemized tax return before the deadline.

Below, you’ll see details about what counts as a qualifying charity, the types of donations that are eligible, and how to prove you made a qualifying donation.

When And How Much Can You Deduct For Charitable Contributions?

You can deduct charitable tax donations when you take the itemized deduction. The type of deduction you take is up to you and depends on your deductible donations.

Since you’ll need to list your individual tax-deductible contributions, you’ll want to have proof of these donations. If you donated items, the organization can provide you with a receipt of the items’ value. Otherwise, you’ll receive a receipt for the cash you donated.

What Charitable Contributions Quality For A Tax Deduction?

Contributions or donations to the following types of organizations generally qualify for a tax deduction:

●      A community foundation or trust that’s registered as a nonprofit operating for educational, child welfare, animal welfare, medical research or religious purposes

●      Religious organizations, such as a church or synagogue

●      Nonprofit volunteer fire companies

●      War veteran organizations formed in the U.S.

●      U.S.-based fraternal societies as long as contributions are for charitable purposes

●      Qualifying nonprofit cemetery companies

You can also find a complete list of qualified charities on the IRS website or search for tax-exempt organizations.

Types Of Donations That Are Tax-Deductible

Let’s discuss the most common types of tax-deductible charitable donations that qualify in the eyes of the IRS. Before putting one on your federal tax return, it’s important to seek the assistance of a tax professional to ensure it qualifies.

Cash Donations

You can donate cash, whether it’s mailing a check or paying using your credit card. Other cash donations include payroll deductions, automatic withdrawals from your bank account and simply using your debit card.

To claim the deduction, verify whether the IRS considers it a qualifying organization and whether the organization can offer proof of your donation. You should be able to get a receipt or invoice – outlining the date and amount you donated – plus other relevant information about the nonprofit organization, such as its tax ID number.

Noncash Donations

The term “noncash donations” tends to be vague, so it’s important to check the IRS website or consult a reputable tax professional for clarity if in doubt about whether your donation falls into this category. Essentially, noncash donations are items that aren’t cash or a cash equivalent (such as a check). These donations can include furniture, artwork and other items of value.

To deduct noncash donations, you’ll need to have a third party (most likely the organization you donated to) give a fair market value and provide a description of what you donated. You’ll use this information in your tax return. Other paperwork you’ll need includes relevant information about the organization you donated to and when you donated.

Also, caps differ for non-cash gifts to private foundations versus public charities. The cap is currently 30% of the taxpayer’s AGI for private foundations, while the limit is 50% for public charitable organizations.

Appreciated Property

Appreciated property includes noncash items that can go up in value, such as stocks, bonds, profitable businesses and physical assets – like gold that fluctuates in price. As with other charitable donations, you’ll need to make donations of these property types to a qualifying organization.

When you donate appreciated property, make sure you receive a receipt or invoice of what you donated and its current market value. That’s the amount you’ll need to use when itemizing your tax return.

In some cases, you may have to get an appraisal of the property from a qualified professional. Typically, you’ll only need one if the property is over a certain amount. Check with the IRS or a tax professional to determine whether an appraisal is necessary.

Items

Typically, donated items include noncash donations such as household goods, used clothing or new toys. Items must be in good, used condition, and the charity or nonprofit must accept the items for them to count as a charitable donation.

The organization will offer you a receipt of the fair market value, though you may have to provide this value. You can consider the average price on the items you’ve donated, but some charities offer guidance to establish the fair market value.

Some items, such as cars, will require extra paperwork. For instance, if the charity sells your car and it’s worth over $500, the charity will need to send you Form 1098-C within 30 days of the sale.

Out-Of-Pocket Expenses For Volunteer Work

You may be able to deduct some expenses you incur for a qualified organization. Examples of such expenses include mileage, parking, tolls and public transportation costs if you drive while doing volunteer work.

You may also be able to deduct any uniforms (including the purchase and care of them) if you need to wear them while volunteering. If you have students or children living with you under a qualified program, you may likewise be able to deduct the amount you spend on them.

Since the type of paperwork or proof can vary, it’s best to seek the help of a qualified tax professional.

Donated Labor: Is It Tax-Deductible Charitable Giving?

Labor isn’t tax-deductible as a charitable donation. For example, a professional photographer donating their time to take photos of a fundraising event for their favorite charity can’t claim a deduction.

However, as mentioned earlier, expenses related to the volunteer work might be tax-deductible.

How To Claim A Charitable Contribution Deduction

To claim a tax-deductible donation, you’ll need to highlight this on your federal income tax return.

You can list specific deductions by itemizing them on Schedule A of Form 1040 as long as you follow the instructions the IRS provided. You’ll most likely need to provide proof, such as the amount you donated and details about the qualifying organization or nonprofit.

You can also work with a professional tax preparer to determine whether you’re better off itemizing or taking the standard deduction. If you’re filing taxes yourself, before choosing the option to itemize deductions, consider whether your itemized deductions would add up to more than the standard deduction.

FAQs About Tax-Deductible Donations

Here are some of the most frequently asked questions about tax-deductible donations.

Are donations tax-deductible?

Yes, qualifying donations are tax-deductible. They need to be gifts of cash or property where you don’t get anything in return. To learn more about what counts as a tax-deductible donation, check the updated regulations on the IRS website.

Are GoFundMe donations tax-deductible?

GoFundMe donations are generally not tax-deductible. That’s because donations made to a personal fundraiser are typically treated by the IRS as non-tax-deductible personal gifts.

However, GoFundMe allows charities to conduct fundraising efforts on its platform, and those contributions may be tax-deductible. Before including contributions from GoFundMe in your tax return, it’s best to check with the platform and/or a tax professional.

Can you claim a charity tax deduction without itemizing your taxes?

You probably won’t be able to claim a charity tax deduction if you take the standardized deduction. In the past, the IRS made an exception where you could deduct up to $300 per person, but that rule is no longer in place.

What donations don’t qualify for a tax break?

Donations to certain people and organizations are considered not tax-deductible. Examples include political parties, candidates for public office and political action committees (PACs). Other donations that are generally not tax-deductible include your volunteer hours and donations for business leagues, labor unions, fraternities and sororities.

The Bottom Line: Many Donations Are Tax-Deductible, But You Have To Itemize

Tax deductions decrease your taxable income. How much you can deduct depends on factors such as your gross income and the value of your charitable contributions.

The amount that can be deducted when itemizing may differ for every tax filer because it’s equal to the sum of each tax-deductible item contributed. Itemizing deductions takes extra work and may be more susceptible to an IRS audit.

To get the most out of your tax deductions, it’s best to speak with a finance or tax professional. To monitor your charitable deductions throughout the year, download the Rocket Money^SM app to conveniently see all your finances in one place.