Tax Deductible Donations: Rules For Giving To Charity

What is a charitable donation?

A charitable donation is a contribution of money or goods to a tax-exempt organization, such as a charity, that can reduce your taxable income. To claim a deduction for charitable donations on your taxes, you must have received nothing in return for your gift, and you must itemize on your tax return by filing Schedule A of IRS Form 1040.

How charitable tax deductions work

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. IRS Publication 526 has the details. The 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.

Charitable deductions 2022

A temporary tax law ushered in by the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, allowed taxpayers to claim up to $600 in cash donations to qualified charities on their taxes without having to itemize on taxes filed in 2021 and 2022.

This tax benefit has expired and is not available for tax year 2022 (taxes filed in 2023).

How to claim 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.

Things to remember about tax-deductible donations

Tax deductible donations must meet certain guidelines, or you won’t get the extra cash to accompany your good deed. Here’s how to make your tax year a little sweeter.

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. 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.
• Before you donate, ask the charity how much of your contribution will be tax-deductible.

2. Document your 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 circumstances:

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 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.

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.