What Is the Charity Tax Deduction? - SmartAsset

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. 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. 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. Consider working with a financial advisor as you decide how much to donate to charity.

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 nonprofit 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
Charities
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.

Tax Tips

If you need help with tax-planning or charitable donations, it might make sense for you to find a financial advisor to guide you. If you don’t have a financial advisor yet, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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.