Donating to Charity & Taxes: An Intro Guide

There are so many good reasons to donate to charity: helping others in need, improving your community, doing a feel-good deed, and more. But did you know that donating to charity has financial benefits, too?

Charitable donations may be tax deductible. Deducting donations can help lower the portion of your income that’s taxed, reducing the amount you pay in taxes. While you might not be making donations to charity for a tax deduction specifically, it’s worthwhile to understand how you can maximize the benefits of your philanthropy.

In this post, we’ll cover the basics of donating to charity and your taxes, including how donating to charity impacts taxes, what kind of donations to charity allow tax deductions, and your other pressing questions to help you prepare to file and make the most of giving.

What is a Tax-Deductible Charitable Contribution?

If you donate money or goods to a charity or even volunteer your time, you may be able to save money on your taxes. That said, only certain donations and organizations qualify. 

Typically, eligible charitable organizations are those registered as a 501(c)(3). This may include community organizations, religious organizations, volunteer fire companies, fraternal societies, and many more.

You can check to see if the organization you are going to make a donation to qualifies at the IRS website. You must give to a registered non-profit organization (not an individual) that operates as a true charity in order to take a tax deduction for the donation.

Who Can Deduct a Charitable Donation?

If you donate cash and non-cash items to a 501(c)(3) organization and you itemize your deductions, then you can deduct the fair market value of your donations. Be aware that you’ll only be able to take a deduction for your charitable donations if you itemize your deductions—not if you take the standard deduction. 

If your itemized deductions are close to the standard deduction ($14,600 single and $29,200 married filing jointly), donating may increase your itemized deductions enough to be over the standard deduction. This allows you to deduct more and save money on your taxes.

Note that you can typically only deduct up to 60% of your taxable income, even if you’ve donated more. For example, if you make $100,000 in a year and donate $70,000, you can still only deduct a maximum of $60,000 from your taxable income.

Donating Cash vs. Donating Stuff

When you write a check, charge a donation, or simply provide cash to a charity, the amount of your potential deduction is simply the amount you contributed. Sometimes, you might donate household items, such as old clothing or furniture. In that case, things are not so straightforward. Instead of being able to deduct what you paid for the items donated, you are limited to the amount that the items are worth.

A reasonable estimate, usually based on what you could get for your items at a thrift shop, is sufficient. No matter whether you donate cash or goods, be sure to get a receipt. If you donate something worth more than $250, a receipt is required. If you donate goods worth more than $500, you have to attach Form 8283 to your tax return. If your deduction is more than $5,000 per item (or for a group of similar items), you must obtain a qualified appraisal as well. 

Don’t worry about figuring out the accurate value of your donations. TurboTax ItsDeductible will help you accurately value and track your donations year-round, and then you can automatically import your donations into your tax return at tax time.

Donating your time

In addition to donating money or goods to charities, you may also be able to save money on your taxes when you donate your time via volunteer work. While you can’t donate the value of the services you performed, you may be able to deduct the value of expenses you had while doing volunteer work. This may include things like: 

• Expenses associated with traveling to, from, and during volunteer work
• The cost of food or lodging for your volunteer work 
• The cost of a uniform worn specifically for that volunteer work 

In order to deduct these expenses, you’ll need documentation from the charity about the volunteer work you performed and associated expenses. You’ll also need copies of all your receipts.

Special rules for vehicle donations

When donating a car, your deductible amount varies depending on the value of the car. 

• If the car is worth $500 or less, you can write off the value of the car, up to $500, from your taxable income. 
• If the car is worth more than $500, you can deduct the lesser of the following:
  • The value of the car 
  • The proceeds from the sale of the car by the receiving charitable organization. 
• In the case that the organization sells your car for under $500, you can still deduct $500.

Did the Charity Give You Anything?

If you receive something in exchange for your donation, like a nice meal or a gift card, you can only deduct your contribution to the extent it exceeds the value of what you received. So, if you make a $150 donation to a charity that provides you with a meal valued at $50, your tax deduction is $100.

Fortunately, most charitable organizations provide you with a summary of the tax-deductible amount of your contribution when they send you a letter thanking you for your generosity.

Timing Your Donations

Whether you donate cash, non-cash goods, or charge the donation on a credit card, you can deduct your contribution in the year you make the donation. Some methods used to donate are pretty cut and dry with regard to when the donation is considered deductible, but there may be a few methods used, like via check, text message, or charge card, where you may be wondering, “When is my donation considered made and tax deductible?”

• Donations via check: The donation is considered delivered on the date you mailed the check.  
• Contributions via text message: Deductible in the year you send the text message if the contribution is charged to your telephone or wireless account.
• Credit card: Contributions charged on your bank credit card are deductible in the year you make the charge.

Don’t forget you can even make a donation on the last day of the year and receive tax savings while helping someone in need. A donation made in late December means tax savings on a return due less than four months later. A donation made the following January can’t be claimed until the following year.  

While potential tax savings shouldn’t impact your charitable giving, it makes sense to be mindful of the opportunities provided by appropriate charitable tax planning. After all, the more you save when you donate, the more you can afford to donate again. Now is the perfect time to show your generosity and give to your favorite charity.

Common mistakes and how to avoid them

When it comes to donating to charity and taxes, it can be confusing. Be careful not to make one of these common mistakes when deducting charitable donations from your taxes. 

• Failing to document donations: You must have a receipt for any contribution of $250 or more, or of any non-cash item. 
• Overestimating your donation values: As a rule, you can estimate the value of your donation at whatever the item would sell for at a thrift store 
• Donating to a non-qualified charity: A charity typically must be a 501c-3 for your tax donation to be deductible. 

TurboTax Has You Covered

Don’t worry about knowing these tax rules around donations to charity and tax deductions. No matter what moves you made last year, TurboTax will make them count on your taxes. Whether you want to do your taxes yourself or have a TurboTax expert file for you, we’ll make sure when it comes to donating to charity and taxes you get every dollar you deserve and your biggest possible refund – guaranteed.