What Is the Charitable Contribution Deduction?

The Internal Revenue Code (IRC) includes a tax break for charitable giving. However, claiming the charitable contribution deduction is subject to numerous rules. For instance, your donation must be made to a qualifying organization, and the deductions for some contributions are limited.

You must also itemize to claim this deduction, but that's not always the best option for every taxpayer. Learn more about charitable giving rules and how to use these deductions to minimize your tax bill.

Rule #1: You Must Itemize

The Internal Revenue Code requires taxpayers to either 澳洲幸运5官方开奖结果体彩网:itemize their deductions or claim the standard deduction for their filing status. They can't do both. A primary consideration is which option subtracts more from their incomes so they don't end up paying tax on more than they have to.

However, you're not comparing just your charitable contribution to your standard deduction. Itemizing requires completing Schedule A and submitting it with your tax return. This schedule also includes other expenses you can deduct, such as 澳洲幸运5官方开奖结果体彩网:home mortgage interest and state and local taxes paid during the tax year. Compare the total of all your deductions on Schedule A to the standard deduction you're entitled to claim to decide which one makes sense for you.

The standard deductions for the 2024 tax year are $14,600 for single taxpayers, $21,900 for those who qualify as head of household, and $29,200 for married taxpayers who file jointly. They increase to $15,000 for single taxpayers, $22,500 for heads of household, and $30,000 for married taxpayers filing jointly for the 2025 tax year (filing in 2026).

Rule #2: You Can't Be Rewarded

Dedඣuctible donations♌ are subject to what the IRS calls quid pro quo adjustments. You must subtract the value of anything you receive in return for your gift.

Let's say you contribute $500 to a raffle conducted by a charitable organization to raise money and win the prize, which is a $95 tablet. You must subtract its fair market value (FMV) from your charitable contribution: $500 - $95 = $405. Thus, you can only claim $405 as a deduction.

Rule #3: The Charity Must Qualify

Paying your out-of-work neighbor's utility bill this month won't result in a charitable contribution deduction. Your gift must be made to a qualified, tax-exempt organization under IRC rules. Eligible organizations include religious groups (churches, synagogues, temples, or mosques), war veterans' groups, the Salvation Army, United Way, and certain homeless shelters.

The IRS takes the headache out of this rule by providing a tool on its website. You can enter the name of the organization you're considering or its employer identification number (EIN) if you have it. You can search by city, state, or country.

Rule #4: Cash Gift Limitations

The IRS limits cash contributions to no more than 60% of a taxpayer's 澳洲幸运5官方开奖结果体彩网:adjusted gross income (AGI). You'll need a written "contemporaneous" receipt from the organization if you donate more than $250. The acknowledgment must state the amount of cash you gave and any property you might also have donated. The receipt must also be provided to you when you contribute.

You'll also need proof of your payment. This can be a canceled check, a credit union or bank statement, a credit card statement, or an ETF receipt.

Rule #5: Non-Cash Gifts

The 60% of AGI rule doesn't apply to non-cash gifts you make to a qualifying organization. The limits for this type of donation are less: 20%, 30%, or 50%. Each percentage covers several categories of gifts depending on the nature of the organization you give to.

Clothing and household items must be in "good used condition or better," according to the IRS. An exception exists if your gift will result in a deduction of more than $500. You can provide a qualified appraisal of its value and submit it to the IRS along with 澳洲幸运5官方开奖结果体彩网:IRS Form 8283.

The deduction for a vehicle with an FMV of more than $500 is limited to what the organization receives for it when it's sold or its fair market value as of the date you donated it, whichever is less.

Written documentation of the gift will be required in virtually every case and for every type of non-cash gift. Donating an item with a fair market value of more than $5,000 needs a written, contemporaneous receipt, an appraisal, and Form 8283.

The Bottom Line

Giving is golden and can be gratifying, but the IRC imposes numerous rules and limitations. You should claim a tax benefit for your generosity if it's available to you and if itemizing your deductions works to your advantage; however, you should check with a 澳洲幸运5官方开奖结果体彩网:tax professional to mak🍨e sure you get all the rules and requirements right.