Maybe you're a regular donor to dozens of nonprofits. Or maybe you open your wallet just now and again, when the spirit moves you.
Whatever your approach to charitable giving, chances are that when tax time rolls around you start to wonder whether you ought to be chasing down receipts for all the donations you made.
For answers on your own specific situation, you should always check with a tax professional (because truth: tax laws are complicated, and your tax return is one form you never want to fudge). But here are answers to some of the basic questions you might have about deductions for charitable donations.
Are donations to charity tax-deductible?
Yes, with some caveats.
The main caveat is that to claim a deduction you have to itemize your deductions, instead of taking the standard deduction. Another important caveat is that your donation must be to a "qualified organization," like a 501(c)(3) nonprofit (i.e., the loan you make to your brother-in-law to get his sourdough-starter business off the ground may feel like charity, but it probably doesn't count).
Cool. How do I know if I itemize?
Forgive us for sounding like a broken record, but again, rule number 1 is check with a tax pro when it comes to your personal situation.
In a nutshell, itemizing means you add up all the individual deductions you're eligible for up to certain limits, including potential charitable donations, mortgage interest, state and local taxes, or in some cases medical expenses.1 Taking the standard deduction means there's a set dollar figure you take as a deduction—in the 2023 tax year it's $13,850 if you're a single filer or $27,700 if you're married filing jointly. It generally only makes sense to itemize if all your individual deductions add up to a greater amount than the standard deduction.
But most people don't itemize. The IRS states that only 11% of individuals itemize deductions.2
I do itemize! What do I need to deduct my donations?
You'll generally need records for any tax-deductible donations you made during the relevant tax year. Nonprofits often email a summary out to their donors at the end of the year, to make life easier.
How do I know if a specific contribution I made is deductible?
What did we say about broken records? Always check with a tax pro if you need personalized advice. The organization you donated to may also be able to give you some guidance, and the IRS has resources on its website that can help too, including a search tool that lets you look up whether a particular organization is tax-exempt.
But one major restriction to know about is that donations to individual people—whether through a crowdfunding campaign, a link on social media, or just someone on the street who needs a hand—typically are not deductible. (On the other hand, a donation to a crowdfunding campaign that benefits a nonprofit organization very well might be deductible, so always make sure you understand where your money is actually going.)
What if I donated stuff, not money?
Yup, that's potentially deductible too, but you'll need a receipt that documents what you donated. Charities often have blank receipts ready to go for donors, but you typically need to grab one and fill it out when you make your donation—not later.
These receipts generally include a description of what you donated, plus your estimate of the fair market value of the items (which is probably a lot less than what you paid for them). The IRS has guidelines that can help you figure out an appropriate amount to claim.
What if I donated my time through volunteer work?
Then props to you for your generosity! But the value of your time, or the value of the services you provided, typically isn't deductible.
Out-of-pocket expenses incurred during volunteering might be deductible (think, say, mileage costs if you were driving your car for eligible volunteer work). But again, you'll generally need receipts or documentation to back those up, and you'll need to make sure they meet the IRS's requirements (say it with us this time: always check with a tax pro).
These are white-belt moves. Give me some black-belt ideas!
OK, philanthropy ninja, here are some ideas to consider:
- Donate appreciated securities: If you have stocks (or other investments) that have increased in price since you bought them, consider donating them to get extra bang for your buck. You can typically take a deduction for the current market value of the securities, but also avoid paying capital gains tax on their appreciation (as long as you've owned the investments for more than a year).
- Look into a donor-advised fund: With a donor-advised fund, you can make a deductible contribution today and invest your contribution so it can potentially grow tax-free over time. You can then advise the fund to make grants to nonprofits of your choosing. (Learn more about how donor-advised funds compare to other giving vehicles and take a quiz to find out if a donor-advised fund might be right for you.)
- Consider bundling your donations: Let's say that in a typical year you don't donate enough to merit itemizing, but you're close. One option, if you have the resources, would be to bunch several years' worth of donations into a single year's contribution to a donor-advised fund. You could take a deduction for the full amount of your donation that year. 3 And thanks to the fund's structure, your money could then be parceled out to the charities you choose slowly over a number of years.
Ready to take the next step? Learn more about charitable giving strategies and take a look at our charitable contribution calculators, which can help you put numbers on your potential tax savings. If you're interested in donor-advised funds, consider exploring the Fidelity Charitable® Giving Account®, which supports grants to virtually any 501(c)(3) IRS-qualified public charity.