Donations you make to qualified charities are tax deductible and can reduce your taxable income, which in turn can help lower your tax bill. You'll likely need to itemize your tax deductions to claim them. Itemizing your deductions is usually in your best interest when the total of all of your itemized deductions exceeds the amount of the standard deduction you could take for your filing status.
The good news is that for tax year 2021, the return you file in 2022, you may not need to itemize in order to claim a tax deduction for your charitable contributions. Individuals, including those who are married and filing separately, can can claim the standard deduction and a deduction of up to $300 for cash contributions made to qualifying charities in 2021. Married individuals who file jointly can claim up to $600.
- When filing your your 2021 tax return, you can itemize or claim the standard deduction and still claim a tax deduction for charitable contributions (up to certain limits).
- If you itemize, you'll need to use Schedule A to claim a deduction for charitable contributions.
- There are some rules for claiming a deduction for charitable contributions.
- Keep records of your donations.
How to Claim a Deduction for Charitable Contributions
If you're choosing to itemize your tax deductions, you can claim a deduction for charitable giving on Schedule A. The total of Schedule A then transfers to line 12a of Form 1040. You'd claim the total of your Schedule A tax deductions in lieu of claiming the standard deduction. You can't itemize and claim the standard deduction at the same time.
The schedule isn't just for claiming charitable donations. It includes and calculates all itemized deductions you're eligible for. Other possible itemized deductions include things like medical and dental expenses you paid for yourself or for your dependents over the course of the year, including insurance premiums. They also include state and local taxes you might have paid and home mortgage interest.
Rules for Claiming the Charitable Contribution Tax Deduction
The IRS imposes several rules for claiming a tax deduction for charitable contributions.
You Must Actually Donate Cash or Property
A pledge or promise to donate is not deductible unless and until you actually do so.
You Must Contribute to a Qualified Tax-Exempt Organization
Charities will let you know if they have 501(c)(3) tax-exempt status, but some organizations, including churches and other religious organizations, are not required to obtain 501(c)(3) status from the IRS. They count as qualified charities regardless, as do certain trusts and non-profit volunteer fire companies.
The IRS has a search tool on its website where you can check the status of an organization you're considering donating to. You can also check with a tax professional.
You Must Meet Several Record-Keeping Requirements
Keeping Records of Your Donation
Your written records must indicate the name of the charitable organization, the date of your contribution, and the amount that you gave. Canceled checks work well, because the name of the charity, the date, and the amount of the gift all appear there. Bank statements are good, too, when they show a gift paid by debit card, and credit card statements work when they show this same information.
Charitable organizations will often provide donors with written letters of acknowledgment or receipts. The IRS may not let you claim charitable donations of $250 or more if you don't have a written acknowledgment from the charity to document your donation, in addition to your other records.
You might need a separate acknowledgment for each donation if you make more than one contribution over this amount. Otherwise, the single acknowledgment must list each tax-deductible donation in detail with the date you made it.
Tips for Donating Non-Cash Contributions
You must be able to substantiate the fair market value of goods or property you donate, including vehicles, boats, or even planes, and you'll need a written acknowledgment from the charity for this type of donation, as well. You must fill out Form 8283 and include it with your tax return if the property is worth more than $500.
Here are a few tips and things to keep in mind when donating non-cash items:
Make a List Describing the Items You're Going to Give Away
You'll need these details for Form 8283. Keep this list until after you file your taxes.
Note the Condition of Each Item, and Arrive at a Value
The IRS will allow a deduction for any item that's in "good working condition or better." In other words, don't bother to claim a deduction for that old TV in your basement that hasn't worked in years, even if it just needs a single new part. At the very least, you must have it valued in its current condition without the new part. Save the price tag and/or the store receipt to prove the item's value if it's brand new.
You can use valuation guidelines provided online by the Salvation Army or Goodwill for common items such as clothing, small appliances, and other household goods.
You Can Claim a Deduction for Food and Groceries, Too
You can deduct the cost if you donate groceries to a charity. Just be sure to get a written, detailed, signed acknowledgment of your donation—such as, "five loaves of Brand X bread, four 1-pound packages of hamburger"—and keep your grocery store receipt to prove the prices of the items.
Consider Taking Pictures of Your Donations
Having a picture of what you donated can be useful, especially if you're donating a lot of items. It isn't technically a requirement, but it can't hurt in the event that your return is audited. Just snap away on your phone, then send the pictures to your hard drive and save them there, too.
Prepare Your Own Receipt to Prove the Tax-Deductible Donation
If you write it yourself ahead of time, you can simply have the receipt signed when you drop off your items. This way, you can rest assured that the receipt is correct and that it includes all the information you need.
Obtain a Written Appraisal if You're Donating Property Worth More Than $5,000
You must also complete Section B of Form 8283 when you donate more than $5,000.
Limits on the Charitable Contribution Tax Deduction
Generally, you can deduct contributions up to 30% or 60% of your adjusted gross income (AGI), depending on the nature and tax-exempt status of the charity to which you're giving. You can deduct contributions of appreciated assets up to 20% of your AGI.
The Tax Cuts and Jobs Act (TCJA) increased the limit for cash donations to 60% in tax year 2018. This threshold is in place through the end of 2025.
You can carry the excess over to subsequent tax years if your gifts exceed these thresholds. Excess contributions can be carried over for a maximum of five years.
What Charitable Donations Are Not Deductible?
Some contributions aren't tax-deductible, including:
- Gifts made to political parties, political campaigns, or political action committees
- Gifts donated to individual people
- Contributions to labor unions, chambers of commerce, or business associations
- Contributions to for-profit schools and hospitals
- Contributions to foreign governments
That still allows for a lot of charitable giving to whittle away at your tax liability, if you choose to itemize.
Frequently Asked Questions (FAQs)
What are qualified charitable contributions?
Qualified charitable contributions are those made to qualified organizations, including any religious organization, nonprofit, or military veterans' association. There are more organizations that qualify, so check the IRS website for a full list of qualified organizations.
How long can charitable contributions be carried forward?
Charitable contributions that go beyond your annual deduction limit can be carried forward for up to five years. There are some exceptions, such as a 15-year limit for qualified conservation contributions.