What is a charitable donation?
A charitable donation is a gift to a qualified nonprofit organization as designated by the Internal Revenue Service (IRS). Donations include any payment or property exchange that helps an organization achieve its goals.
When it comes to tax deductions, a donor can claim donations as long as they do not receive any benefit in return for their gift. Many U.S. taxpayers enjoy tax breaks from their charitable giving behaviors throughout the year.
Like most elements of tax filing, tax-deductible donations come with specific rules, protocols, and details to be aware of. We put together this go-to guide to simplify the stress and help you claim the most benefit from your contributions.
Feel proactive and ready to file during tax season with everything you need to know below.
Are charitable donations tax-deductible?
Many charitable donations to a qualified tax-exempt organization are tax-deductible. During the filing season, taxpayers can see deductions from their last year of income tax owed and end up owing less or even receiving a refund.
Deducting the value of charitable contributions from taxable income will help you experience less financial burden on your tax bill.
What donations are tax deductible?
While you can claim many donations on your annual tax return, not all donations are tax-deductible.
The following charitable donations may be tax-deductible:
- Monetary contributions: Any donation made with cash, credit card payments, checks, and bank transfers is tax-deductible.
- Property and non-cash donations: Any gift of clothing, household goods, automobiles, land, venues, or other forms of property.
- Securities and appreciated assets: Gifts of stock, donor-advised fund (DAF), bonds, or mutual fund shares to a qualified organization.
- Cryptocurrency donations: Gifts given through cryptocurrency, including variations like Bitcoin.
The way you prepare for tax season matters, so we'll cover more about how to stay organized and get the best chance of a deduction from these gifts.
How tax-deductible donations work
1. Donate to a qualifying organization
The first step to determining your tax deductions from charitable giving is understanding which gifts qualify. Only donations made to an organization with a 501(c)(3) tax-exempt designation from the IRS count for a deduction.
Some examples of qualified organizations include:
- Charities
- Foundations
- Nonprofit schools
- Veterans and cultural groups
- Public parks
- Churches and religious organizations
2. Document your charitable contributions
You'll need all donation documentation when you're ready to file your taxes through an online tax software or accountant. That's why it's so important to proactively record any charitable donations you make in a given year.
Here’s what to hold on to:
- Official receipts from every transaction with a qualified organization
- Official invoices from every transaction with a qualified organization
- Annual giving summaries from qualified organization(s)
Nonprofits are required to share tax-compliant donation receipts, and many will share a year-end summary of your giving activity.
Maintaining these records in a digital or physical folder along with your tax preparation materials is extremely important. If you find yourself digging around for emails and records come January, you might miss the maximum deduction.
3. File your taxes before the deadline
The tax season typically begins in January and ends in April. Any tax-deductible donations you make in a given tax year are filed the following year during tax season.
For example, you may donate on January 1st, 2025, and have a receipt ready for your 2024 tax season, but you'll need to save it to file the following January. On the other hand, a December 31st donation will be eligible for deductions when you file in the new year.
While dates shift each year, here's an example of what's ahead for the 2024 filing season:
- January 29: The start of the tax return filing season for individuals
- April 15: Tax returns or extension requests are due
- October 15: Due date for any taxpayers granted an extension
IRS rules for claiming tax-deductible donations
Tax forms and instructions
Taxpayers must itemize their deductions to see a benefit from charitable donations. Previously, there was a temporary deduction for those who did not itemize, which has since expired as of 2023.
The following forms will help you include your charitable donations on your tax return:
- Schedule A (Form 1040): Use this form to claim charitable donations to qualified organizations within your itemized deductions.
- Form 8283: Use this form to report noncash charitable contributions with a total value greater than $500. You must also complete Section B of this form with a qualified appraiser for any item or group of items valued higher than $5,000.
Deductible amounts
As of the 2023 tax season, individuals can claim up to 60% of their adjusted gross income for cash contributions. The amount may be as low as 20% and fluctuate based on certain limitations.
Some additional details about specific deduction amounts include:
- Any benefit you receive in return for a contribution, such as a merchandise purchase, tickets, goods, or services, must be deducted only for the amount that exceeds their fair market value.
- You can only claim items purchased at a charity auction in the total amount paid that exceeds their fair market value.
Limitations on charitable donations tax deductions
The IRS limits deductibility based on the status of the organization to which you're donating. That said, most established charities will qualify for the maximum deduction.
Here's a snapshot of common IRS deductibility status codes and the limitations associated:
You'll want to check the status of each organization to determine which deduction percentage applies with the Tax Exempt Organization Search.
Charitable contributions that can’t be claimed
While there are several ways to claim charitable contributions on your tax return for a maximum deduction, there are some donations you can’t claim. To prepare ahead of time for the paperwork you may need and avoid claiming a contribution that won’t give you a benefit during tax season, we broke down donations to leave out.
Undocumented gifts
You might give back at a local school fundraiser, throw extra cash in a Girl Scout’s bucket, or contribute during a church ceremony. While the IRS may officially recognize these organizations, you won't be able to claim them without documentation.
Taxpayers must provide receipts for all donations to remain compliant, so it's always a good idea to inquire each time you give. Some organizations won't track each gift, especially made in cash, but others may be able to offer you documentation to help you out during tax season.
Fundraising tickets
You're technically benefitting when you purchase tickets to a fundraising event. That aspect makes fundraising tickets ineligible for tax deductions.
You won't be able to claim deductions for tickets used to participate in any of the following:
- Bingo games
- Events
The good news is you can deduct any donations made in addition to your ticket purchases, even if they are affiliated with the event.
Donation pledges
A donation pledge is a great way to support a nonprofit organization, but is not eligible for a tax deduction. Pledges are popular ways to commit to an ongoing monthly donation or a more significant gift supporting a specific project or initiative.
A payment promise is only considered a deductible expense once money is transferred. That means if you pledge $20 per month for 12 months starting in July of 2024, you can only claim the amount paid through December on your 2024 taxes.
Checks dated in the future
Similar to a donation pledge or intent to pay in the future, a check with a date falling after the close of a given year is not deductible. You can claim any checks that will cash out in the next tax year, but only after the money is transferred to a qualified organization.
Pay attention to the dates you put on checks, especially around the year-end giving season. If you're writing a donation check on December 31, 2024, with a date of January 1, you'll miss the opportunity to claim it on your 2024 taxes.
These same concepts apply to the date your broker transfers a stock gift to a charitable cause. You should only claim those gifts in the year they're completed.
Political contributions
A political party often collects donations to support campaigns. Therefore, these donations are not considered charitable to the IRS and are not eligible for a tax deduction.
Here are a few examples of political donations that are not tax-deductible:
- Donations to a political party
- Donations to a fundraising event that benefits a political party
- Donations for advertising costs of a political campaign
- Expenses related to legislative matters and elections
Tax-Deductible Donations: Your FAQs, Answered
Charitable giving: A tax season win-win
It’s fantastic to show your generosity to a cause that speaks to you. So many organizations need support through volunteer efforts, monetary donations, pledges, and advocacy.
As you flex your charitable giving muscle, it’s great that the government recognizes these efforts as an opportunity for tax breaks. You get to make a difference in the world and simultaneously save money on your taxes.
This win-win scenario can help us all contribute to bettering our communities and making an impact to be truly proud of.
