If you donate to charity, not only are you doing a good deed, but you might also qualify for a tax break. The IRS offers a deduction for eligible charitable contributions. But there are rules for qualifying, so not every donation counts. Here’s what to know as you figure out your strategy for chartable gifting.
What are charitable contributions?
Charitable contributions are donations to a qualified charity. You’re giving money away without getting anything of equal value back in return. Qualified charities are nonprofits working in causes that are religious, educational, scientific, literary, charitable, or based on preventing cruelty to children or animals, per the IRS. They are nonprofit, tax-exempt organizations.
Gifts to individuals and ineligible organizations are not charitable contributions, so they don’t count for the tax break. If you’re unsure whether an organization qualifies, ask before making donations.
Types of charitable donations and contributions
- Cash: Cash is the simplest way to donate to charity. You can write a check, use your credit card, or simply hand over money. If you plan on claiming a deduction, keep records of the transaction. Ask for a receipt if you give money directly.
- Investments (capital gains property): You could give investments to charities like stocks, bonds, and mutual funds. If your investment grew in value since your purchase, you could donate it directly to the charity. If you have owned the investment for more than one year, you could get a double benefit: the fair market value of the investment would be deductible and you wouldn't owe capital gains on the donation.
- Physical property: You could also donate property like cars, boats, furniture, food, clothing, and other goods a charity might need. For household items like furniture and clothing in good used condition, you cannot deduct more than $500 without an appraisal.
If you owned the investment or physical property being donated for one year or less, you’ll only be able to deduct the cost basis of the investment minus what you would have owed in taxes for selling. If the investment lost value, consider selling it first to deduct the capital loss and then donate the cash.
Read Viewpoints on Fidelity.com: Increase your tax savings on charitable giving
- Time (not allowed): If you volunteer, you cannot deduct the value of your time. You could deduct the cost of your transportation to volunteer but not the time itself.
Are charitable donations tax-deductible?
Charitable donations can be tax-deductible. However, to use this tax break, you must itemize your deductions. This means you add up the value of several possible deductions, such as charitable donations, mortgage interest, and state and local taxes. You then deduct this amount from your adjusted gross income (AGI).
To help ensure that your contribution will be deductible, consider researching the organization's tax-exempt status on IRS.gov: Tax exempt organization search
The Federal Trade Commission also has important tips for researching charitable organizations: Before giving to charity
If your itemized deductions are less than the standard deduction, you could take the standard deduction. Charitable donations would not be tax-deductible if you take the standard deduction. Consider the timing of your donations. If your itemized deductions are less than the standard deduction when giving one year of charitable donations, you could combine multiple years of charitable giving into one year to increase your itemized deductions above the standard deduction.
Read Viewpoints on Fidelity.com: Year-end strategies for charitable giving
How do tax-deductible donations work?
You can make as many donations as you want during the year. You have until the last day of December to make tax-deductible donations. You then add up everything you gave to see your possible deduction.
The IRS has maximum limits on how much you can deduct per year based on your adjusted gross income (AGI). The limits depend on what you give:
- Cash: Up to 60% of your annual AGI
- Noncash property: Up to 50% of your AGI
- Investments that appreciated: Up to 30% of your AGI
For example, Laura has an AGI of $100,000 for 2024. If she gives cash, she could deduct donations up to 60% of her AGI, so $60,000. If she wants to give stock that has gained value, the most she could give and deduct is $30,000.
If you give more than the annual limit, that charitable donation tax deduction isn’t lost. Instead, you could claim the unused deduction on your future tax returns for up to 5 years. Typically, contributions that you carry forward are subject to the same limits as the year they are made. For example, cash contributions that fall under the 60% limit in the donation year are still subject to the 60% limit in the year they are carried over to.
Charitable contributions limit 2023: Itemization thresholds
To receive a charitable donation tax deduction, your donations and other itemized deductions must exceed the standard deduction. Here are the standard deductions for 2023 to give you an idea of how much you might have to give:
- Single = $13,850
- Married filing jointly = $27,700
- Married filing separately = $13,850
- Head of household = $20,800
Charitable contributions limit 2024: Itemization thresholds
The IRS adjusts the standard deduction each year for inflation. The standard deductions for all types of filers went up a bit in 2024, meaning there is a higher threshold to reach to be eligible for a charitable donation tax break:
- Single = $14,600
- Married filing jointly = $29,200
- Married filing separately = $14,600
- Head of household = $21,900
How to claim charitable contributions on your taxes
You can claim charitable contributions on your taxes by itemizing your deductions. First, you fill out IRS Schedule A, which adds up all your possible itemized deductions, including donations to charity. You would only move forward with this approach if the total of your itemized deductions is greater than your standard deduction for the year.
If so, you would itemize and submit Schedule A with your tax return. You should keep records of all your donations in case of a possible IRS audit. For any donation over $250, you should get a written acknowledgment of the donation from the charity, including what you gave.
If you make noncash donations over $500, you should complete IRS Form 8283 and submit it with your return. This form asks you to describe what property you gave, the fair market value on the date of donation, and your original cost. For noncash donations valued over $5,000 or donations of household goods that are not in good used condition or better and valued at more than $500, you’ll need to get an appraisal as well.
An accountant or tax software can walk you through itemizing your deductions to claim charitable contributions on your taxes.
Can you take deductions for charitable donations without itemizing?
Most of the time, no. In tax years 2023 and 2024, there is no way to claim charitable donations for a tax break without itemizing. In 2020 and 2021, the IRS did allow people who didn’t itemize to claim a deduction of up to $300 for charitable donations. However, that tax break has since expired. You could monitor tax law to see if the government creates future ways to deduct charitable donations without itemizing.
Other options for charitable giving
Can you make charitable contributions from your IRA? Yes, if you are over the age of 70½, you can donate money straight from your individual retirement account (IRA) to charity. You send the money to charity pre-tax, so they receive the entire amount, and you don’t owe income taxes for the transfer. You can donate up to $105,000 per person in 2024 from your IRA through these qualified charitable distributions (QCDs).
This can be a helpful strategy if you must take taxable retirement withdrawals from your IRA because of required minimum distributions (RMDs) and don’t need the money. Instead, you can donate this money to charity.
Donor-advised funds. If you want a tax break now but prefer to spread your donations over time, you could give to a donor-advised fund. You make an irrevocable gift into the fund that you can’t get back. You can deduct the entire transfer upfront (up to 50% of your AGI) if donating cash, or 30% if donating appreciating securities. You then keep the money in your donor-advised fund and only give to charity when ready. In the meantime, you invest the balance to keep growing it tax-free for the future donations. Find out if it's a good fit with this quiz: Is a donor-advised fund right for you?
Charitable remainder trusts. A charitable remainder trust (CRT) turns your assets into partial income while you’re still alive and then gives whatever is left over to charity at your death. You transfer money and assets to the CRT, which you can’t get back. You then receive future income that is less than the actual value of your property. You also get an upfront deduction based on the expected value of what your trust will donate in the future. When you die, the remaining trust assets go to charity.
Read Wealth Management Insights on Fidelity.com: Understanding charitable gifting
Private foundations. For very large donations, you could launch a private foundation. You set up your own organization with the goal of supporting charities. The Bill and Melinda Gates Foundation is one example. You don’t have to be a billionaire to use a private foundation. Still, you must be giving a very large amount to justify the upfront costs and administrative work versus donating to charity directly. Be mindful, the tax rules may differ when donating to a private foundation.
Read Wealth Management Insights on Fidelity.com: Choosing the right vehicle for your charitable giving goals
As you plan your charitable donation strategy, consider speaking with an accountant, financial planner, and estate planning attorney. Together, you can figure out the most effective way to give while reducing your taxes.
