Charitable Contributions: How to Deduct Your Donations
Working with individuals and small business owners over the years, charitable contributions have always been one of the most asked questions I get. Many people want to give back, but they’re unsure what qualifies, how much they can deduct, or how to properly document their donations. I will try my best to not overwhelm you with all the information. The rules for what is qualified to be a deduction and what is not allowed is lengthy.
Charitable Contributions: The Basics
Simply put a charitable contribution is a gift to or for the use of a qualified organization, made without expecting anything in return.
Charitable donations can provide a valuable tax benefit, but only if you itemize your deductions on your tax return. When you itemize (using Schedule A), you can deduct the amount you donated to qualified charities. This lowers your taxable income and may reduce the amount of tax you owe.
If you take the standard deduction, charitable contributions generally cannot be deducted.
The following is required by the IRS.
- Donations must be made to a qualified 501(c)(3) organization (e.g., churches, schools, public charities).
- Adequate documentation is required, especially for donations over $250.
Common Types of Charitable Contributions:
Remember all donations must be made to a qualified 501(c)(3) organization (e.g., churches, schools, public charities). A receipt or written acknowledgment is required for any gift of $250 or more.
- Cash contributions - The total amount is entered directly on Schedule A.
- Tithes and Offerings - Churches, synagogues, mosques, temples, etc.
- Public Charities - American Red Cross, United Way, Salvation Army, etc.
- Educational Institutions - Colleges, universities, schools with 501(c)(3) status
- Medical or Health Charities - American Cancer Society, St. Jude, etc.
- Charitable Hospitals and Clinics.
- Qualified Disaster Relief Donations - Must be IRS approved disaster to qualify.
- Non-cash donations - Special rules apply to non-cash donations.
- Clothing
- Household Goods
- Furniture
- Artwork or Collectibles
- Vehicles
- Real Estate
- etc.
Here are the special rules are for non-cash donations:
- Over $500 in total non-cash donations: File Form 8283 with your tax return.
- Over $5,000 per item or group: Requires a qualified appraisal.
- Must donate to a qualified 501(c)(3) or government entity.
- Fair market value (FMV) is used to determine the deduction.
- If a vehicle is sold or used by the organization you must receive Form 1098-C from the charity. The information is required to be entered on Form 8283.
- Charitable mileage or out-of-pocket volunteer expenses
- 14 cents per mile (tax year 2024).
Not Considered Charitable Contributions:
- Gifts to individuals (e.g., GoFundMe for personal causes)
- Political contributions
- The value of your time or services
- Payments where you receive goods/services in return (unless partially deductible)
- Non-prescription nicotine patches or gum
- Medical expenses that were reimbursed by insurance or paid through a tax-advantaged account like an HSA or FSA
Additional conditions:
High income taxpayers have limits on their donations:
- Cash donations to public charities: Up to 60% of adjusted gross income (AGI)
- Non-cash or appreciated property donations: Usually limited to 30% of AGI
- Excess amounts can be carried forward for up to 5 years
How to Claim Charitable Contributions
If you file online through FileYourTaxes.com, the system will automatically determine the higher deduction amount and include Schedule A when applicable. It’s seamless and ensures you won’t miss out on the larger deduction!
If you’re filing a paper return, make sure you:
- Prepare Form 1040
- Complete and attach Schedule A, Itemized Deductions
- Complete Form 8283, Non Cash Donations (when applicable)
- Include any supporting forms, like your W-2, 1098-C, etc
- Double-check that your income meets all requirements
