Understanding Tax Deductions for Charitable Donations

| 5 min read Financial Assistance

The old saying goes that it’s better to give than to receive. If you aren’t convinced, studies have shown that helping other people can make you happier and may actually help you live longer. And another added bonus? Doing good can reduce your tax bill when it’s time to write a check to Uncle Sam.

If you’re interested in donating to a good cause while also reaping the tax benefits of charitable giving, it’s important to understand the tax rules. This article explains the most important aspects of tax deductions for charitable donations.

What are the tax benefits of giving to charity?

The tax benefits of donating to charity are simple: Deducting charitable donations from your taxes may reduce the amount of money you’ll owe to the federal government come April 15th, depending on your individual tax situation.  

The IRS allows individuals to deduct charitable contributions up to 50% of their adjusted gross income, though 20% and 30% limits sometimes apply. Celebrities and the super wealthy often take advantage of these high limits and donate huge chunks of money to nonprofits. But even if you’re not donating billions of dollars like Bill Gates, certain charitable contributions might still help reduce your tax burden.

How do charity tax deductions work?

If you’ve ever heard someone say “you can write that off,” they were likely referring to tax deductions. A few of the most common deductions are student loan interest, business expenses, home mortgage interest, and donations to charities.

How do I claim a deduction for charitable donations?

Here are the main steps to claim a deduction for charitable donations:

  1. If donating directly to a charity, make sure it is a legally registered 501(c)(3) Certified Charity. To be absolutely certain, you can always check an organization’s status on the IRS website.
  2. Itemize deductions when filing your taxes. You can only claim charitable deductions on your tax return if you itemize deductions.
  3. On your tax return, you can claim a charity tax deduction for charitable giving on Schedule A (Form 1040).

How do you know if contributions are tax deductible or not?

You might be surprised by some of the ways you can claim charitable donations on your taxes. Below are some general rules about which donations are considered deductible and which aren’t, according to the IRS.

Types of charitable contributions that are deductible

  • Donations to religious organizations
  • Donations to federal, state, and local governments
  • Donations to war veterans’ groups
  • Donations to nonprofit schools and hospitals
  • Expenses incurred from a student living with you
  • Volunteer expenses
  • Payroll deductions to charities through your employer

Types of charitable contributions that are not deductible

  • Donations to foreign organizations
  • Donations to political parties, action committees, or fundraisers
  • Gifts donated to individuals
  • Donations to foreign governments
  • Donations to for-profit schools or hospitals
  • Donations to social and sports clubs
  • Donations to labor unions
  • Donations to homeowners’ associations
  • The cost of lottery, raffle, or bingo tickets, even for fundraisers

Different types of charitable donations have their own set of tax rules. Luckily, the IRS provides a comprehensive guide on charitable contributions to help you navigate any uncharted tax territory.

What about online fundraising and charitable tax deductions?

In the age of crowdfunding, it has never been easier to support your favorite charity. Technology has changed the way people all over the world help others. Lending a digital hand to those in need is now effortless, and finding best charities to donate to takes no time at all.

The top charity fundraising sites have done an incredible job of simplifying the giving process for donors and organizers alike. Reputable sites now offer fundraising platforms and  issue tax-deductible receipts for donations made to certified charity fundraisers. They also give donors a way to easily track their donations in one place.

Other important tax tips

If you want to make the most of your charitable contributions, you’ll want to keep these other tax rules in mind.

Time your donation correctly

Donations are only deductible in the year that they’re made. This means that you must make donations by December 31st to count. Checks can’t be dated for the following year.

Note any personal benefits and incentives

If you receive any incentives or personal benefits from your donation, the IRS requires you to subtract that cost from the amount you plan on claiming as a charitable donation. For example, if you receive tickets to an event valued at $25 for your donation of $200 to an organization, you could only claim $175 as a charitable donation on your taxes.

Always ask for receipts

It’s important to get a receipt as proof of your contribution when making non-cash donations. The receipt should state the amount of the donation, the date, and the name of the organization you donated to. For cash donations of $250 or more, you will need a receipt to support your contributions.

Consider working with a tax professional

Tax laws can change on a yearly basis and everyone’s situation is different, so we recommend working with a tax professional before following any of the advice outlined in this guide. A tax professional will ensure you’re adhering to tax laws, and they’ll be able to help you maximize charity tax deductions.   

Give back to an online charity fundraiser right now

Thousands of people have used GoFundMe to give back to causes they care about. Through our platform, individuals can quickly donate to certified charities and become part of an online community of people who share similar passions.

Discover charity fundraisers on GoFundMe, then make a tax-deductible contribution to your favorite 501(c)(3). If you’d like to make an even bigger impact, give back with charity fundraising by starting your very own crowdfunding fundraiser. Sign up now and start making a difference for those in need.

Start a charity fundraiser

Written by caitlin