Tips On Deducting Charitable Contributions

Donating to charity is a meaningful way to give back—but it can also provide you with significant tax savings. The IRS offers deductions for qualifying charitable contributions, but to claim them properly, you need to follow specific rules and maintain detailed records. Whether you’re giving cash, goods, or appreciated assets, here’s everything you need to know:

1. Donate to IRS-Recognized Charities Only

To deduct a contribution, the recipient must be a qualified organization, typically recognized under section 501(c)(3) of the Internal Revenue Code. Contributions to the following entities do not qualify:

• Individuals (e.g., personal fundraisers like GoFundMe, unless routed through a 501(c)(3) fiscal sponsor)

• Political organizations or candidates

• Foreign organizations (unless specifically authorized)

Tip: Use the IRS Tax Exempt Organization Search to verify an organization’s status before donating.

2. You Must Itemize Deductions on Form 1040 (Schedule A)

Charitable deductions are only available if you itemize your deductions rather than taking the standard deduction. As of 2025, the standard deduction is:

• $14,000 for single filers

• $28,000 for married couples filing jointly

If your total itemized deductions (including mortgage interest, medical expenses, and charitable gifts) exceed the standard deduction, itemizing may reduce your tax liability.

      Key Forms:

• Form 1040

• Schedule A (Itemized Deductions)

3. If You Get Something in Return, Adjust the Deduction

When you receive a benefit in exchange for your contribution (like event tickets, meals, or merchandise), you can only deduct the amount that exceeds the fair market value (FMV) of what you received.

Example:

• You pay $300 to attend a fundraising gala.

• The value of the dinner and entertainment provided is $100.

• Your deductible amount: $200.

Other examples:

• Charity auction items: Deduct only the portion you paid over the item’s FMV.

• Membership benefits: If you receive free admission or discounts, part of your dues may not be deductible.

4. Donating Property or Goods? Use Fair Market Value (FMV)

If you donate tangible property—like furniture, electronics, collectibles, or art—you can deduct the FMV of the item. FMV is what a willing buyer would pay a willing seller, not necessarily what you originally paid.

Common Examples:

• Used clothing donated to Goodwill or Salvation Army

• Computers or office furniture donated to a school

• Stock or securities (more on this below)

Tip: Create a log of donated items and attach a reasonable FMV using thrift store price guides or similar tools. For example, a gently used men’s jacket might have a value of $20–$30.

5. Household Items Must Be in Good Condition (or Better)

Per IRS rules, clothing and household goods must be in “good used condition or better” to qualify for a deduction, unless the item is appraised at more than $500.

Items that usually won’t qualify:

• Broken appliances

• Damaged clothing

• Furniture missing parts

Vehicle Donations:

• You can only deduct the amount the charity sells the vehicle for, unless the organization keeps it for use.

• You’ll receive Form 1098-C from the charity.

6. Noncash Contributions Over $500? Use Form 8283

If your total noncash contributions exceed $500 in a single year, you must include Form 8283 with your tax return.

Details Required:

• Description of the donated property

• Date of acquisition and how you acquired it

• Cost basis (for appreciated assets)

• How you determined FMV

For donations over $5,000, a qualified appraisal is typically required. This often applies to high-value artwork, collectibles, or significant equipment.

7. Keep Accurate and Detailed Records

Maintaining documentation is essential—the IRS can disallow deductions if records are incomplete.

For Cash Contributions:

• Cancelled checks

• Bank statements

• Written acknowledgments from charities

• Credit card receipts

For text message donations, your phone bill must show:

• The recipient charity’s name

• The date of donation

• The amount

Payroll deductions require:

• A pay stub or W-2 showing the deduction

• A pledge card or other documentation from the charity

8. Get a Written Acknowledgment for Contributions of $250+

For any single donation of $250 or more, the IRS requires a written acknowledgment that includes:

• The amount of the cash or a description (but not value) of any noncash items

• Whether you received any goods or services in exchange

• A good faith estimate of the value of those goods or services, if applicable
  

This acknowledgment must be received before you file your return, or by the due date (including extensions), whichever comes first.

Note: If you make multiple contributions under $250, you don’t need this statement—but you still need basic documentation.

Bonus Tips to Maximize Your Deduction

Donate Appreciated Assets

• Stocks, mutual funds, or real estate that have increased in value can be donated without paying capital gains tax, while deducting the full FMV.

• Must be held for over one year to qualify for full deduction.

Qualified Charitable Distributions (QCDs)

• If you’re age 70½ or older, you can donate up to $100,000 directly from your IRA to a charity.

• This counts toward your Required Minimum Distribution (RMD) and is not taxed.

Plan Strategically

• Bunching donations into one tax year can help you surpass the standard deduction threshold and justify itemizing.

• Donor-Advised Funds (DAFs) allow you to donate a large amount at once, claim a deduction, and disburse to charities over time.

Final Word: Be Generous, But Be Smart

Charitable giving is a powerful way to support causes you believe in—and it can offer tax savings when done correctly. Understanding the IRS rules, keeping thorough documentation, and planning strategically ensures you benefit while doing good.

Consider consulting a tax advisor—especially if you’re making large or complex donations like real estate, collectibles, or securities.

Don’t leave your charitable contributions—and potential tax savings—to chance. Schedule your free consultation with Trustway Accounting today and make sure your generosity pays off—on your taxes and beyond.