There are a lot of reasons to give to charity. The most obvious is that you’re giving money to a cause or group that you believe in. This can make you feel like you’re making a difference in the world. However, there is a common reason beyond that to make a donation: the charity tax deduction.
When you give money to charity, you can use the gift to reduce the amount of money on which you must pay taxes. It’s a fairly simple process to get the charity tax deduction, though it does require you to take a few actions to get the most out of your donation. This guide will take you through how to get your charity tax deduction, what qualifies as a charity tax deduction and other questions about the process.
How to Claim a Tax Deduction for Charitable Giving
The most important step to get your charitable tax deduction is to claim the charitable donation on your taxes. This will let the IRS and state tax-collecting agencies know that you have given a charitable donation and that you qualify for a deduction.
To claim the charitable tax deduction, you’ll have to itemize your deductions. A lot of young people with relatively simple taxes just take standard deductions, but that is not an option if you’re looking to take advantage of a charitable tax deduction.
You’ll list the charitable deduction on your tax return form (or list it in the relevant box using a tax-preparation service like TurboTax) and the money you donated to charity will deducted from the total income you pay taxes on for that year. You can only claim a tax deduction for a charitable donation in the year you give the donation.
What Qualifies As a Charitable Donation?
Most donations to non-profit organizations qualify for the charitable tax deduction. Some organizations that do count for the charity tax deduction include:
- Religious organizations like mosques, synagogues and churches
- Nonprofit organizations, including schools and volunteer emergency departments
- Veterans groups
- Public parks
However, there are some donations you can’t deduct on your tax return. Here are some donations that do not count for the charity tax deduction:
- Donations to social welfare and civic organizations registered under section 501(c)(4) (except for veterans groups and volunteer emergency departments)
- Tickets to fundraising events or raffle tickets
- Donations directly to a family or community member to help after a tragedy (like to a GoFundMe campaign that isn’t a Certified Charity campaign)
Should You Keep Records of Your Donations?
Always make sure to keep records of your donations if you plan to take advantage of the charity tax deduction. If you are audited, you’ll have to prove to the IRS or other tax-collecting organization that you gave the donation. The IRS accepts the following forms of proof for a charitable donation:
- Cancelled check
- Credit card statement
- Bank statement
- Written proof from the charity
If your donation is for more than $250, you may also need to prove to the IRS that you did not receive anything in return for the donation. This can be done with a statement from the charitable organization.
Is There a Charitable Donation Limit?
There is a limit to the amount of charitable donations you can deduct from your taxable income. Generally speaking, you cannot deduct more than 50% of your adjusted gross income. Yes, this means that if you have a big bank account you can’t get out of paying taxes entirely by giving the equivalent of your salary in donations.
There may be some cases where the limit is only 20% or 30%. You’ll likely need to talk to a tax attorney to see if that applies to you.
What If You Donate Non-Monetary Items?
You can also get the charity tax deduction if you donate non-monetary items. This includes making donations of old clothes or housewares to charities like Goodwill or the Salvation Army.
You can deduct the fair market value of the goods. The IRS only allows for deductions for donations of items in good condition. If you are deducting more than $5,000 for non-monetary items, you’ll need to attach a qualified appraisal to your tax return.
The Bottom Line
Giving to charity can give you a warm and fuzzy feeling for helping others, and it can also help you save a bit of cash when it comes time to file your taxes. Just make sure you save proper documentation so that you can declare the deduction on your taxes and prove it was real in case you get audited. Also make sure to follow the rules for what donations are eligible for the deduction and what to do if you’re donating non-monetary items.
- If you need help with tax-planning or charitable donations, it might make sense for you to find a financial advisor to guide you. SmartAsset can help you find the right advisor for you with our free financial advisor matching service. All you need to do is answer a few questions and we’ll match you with up to three financial advisors in your area. All the advisors on our platform have been fully vetted and are free of disclosures. Each of your matches will then reach out to you to talk about working together.
- If you’re looking to get an estimate of what your income tax total will look like, use SmartAsset’s free income tax calculator.
- Knowing how to fill out a W-4 form is the first step to getting your taxes done properly. Make sure you take the time to review.
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