Understanding the tax benefits of charitable contributions

Whether it makes sense for you to include charitable contributions on your tax return depends on your filing status and taxable income, as well as how much you donate and what other tax deductions you qualify for.

Tax benefits for making charitable donations

Because charitable donations can reduce how much you owe in taxes, they can ultimately lead to a bigger tax refund.

It works like this: When you make charitable donations and include them in the itemized deductions on your tax return, it can reduce your taxable income. When your taxable income is lower, you generally owe less in taxes. If you have paid more than you owe, you typically get a tax refund. By reducing your taxable income further, your donations can increase the size of your refund.

What are charitable donations?

When you give money or property to a qualified charitable organization—typically a 501(c)3 organization registered with the IRS as a qualified nonprofit—you are making a qualified charitable donation. The list of qualifying organizations includes religious organizations, local food banks, schools, museums, animal shelters, and many more. Many qualified organizations are well known such as the Red Cross, St Jude Children’s Hospital etc., but your contributions are deductible to any organization is listed on the IRS qualified organization list.

You can make donations in many different forms, including cash, check, credit card, payroll deduction, personal property (such as furniture, electronics, and clothing), real estate, and even out-of-pocket expenses related to volunteer work.

Items that aren’t eligible for a deduction:

• Money for a specific person unless through a nonprofit
• The value of your volunteer time
• Childcare expense while doing volunteer work

How much can I donate to a charity without itemizing?

If you want tax deductions for your charitable contributions, you must itemize your deductions on Schedule A. This is a change from past years when you could deduct a limited about of contributions even if you took the standard deduction. Good news: The non-itemizers charitable deduction on Form 1040 will be back starting in 2026.

If the total value of your charitable donations plus any other eligible itemized deductions is less than the value of your standard deduction, you are generally better off taking the standard deduction. In certain cases, though, the IRS requires itemization.

Check your standard deduction before you start itemizing

Documentation and recordkeeping of charitable donations

If you want to claim a tax deduction for charitable giving, the IRS requires proof of the value of your donations. The documentation you need varies by the type of donation.

For cash donations made by cash, check, credit card, payroll deduction, or funds transfer, you need a bank record and/or a printed or emailed receipt.

For donations of property and/or investments, you need the name of the organization, a list of the items you donated, stating when you acquired them, how much they cost, when you donated them, and their fair market value at the time of the donation.

Donated items worth more than $5,000 at the time of donation require an official written appraisal statement. You also need an appraisal when donating items such as real estate or artwork that have increased in value since you acquired them.

You generally do not need to submit the receipts or other proof of your donations with your return. You will need to be able to provide them to the IRS if they request them. You should keep your receipts for at least three years.

How much will a donation reduce my taxes?

The answer to this one depends on a lot of factors, including your filing status and taxable income as cash donations are limited to 60% of income.

If you itemize your deductions, and your itemized deductions exceed the value of your standard deduction, the additional amount reduces your taxes by around $1 to $12 for each $25 to $50 of value. IRS Publication 526 has all the details.

With age comes an additional donation opportunity

The law requires taxpayers to start traditional IRAs or retirement plan distributions when they reach age 73. If you make your contribution by having your plan administrator directly transfer the money to a charity of your choice, your contribution up to $100,000 of your transfer will be tax-free. If you make this contribution, you can’t claim it as part of itemized deductions.

If you can do this, it’s essentially a win-win for both the charity and you. It’s also important to note that money distributed from a pension fund or Roth account isn’t subject to these rules.

Is it better to give to one charity or many?

This is a personal choice. The answer depends on how many organizations you want to support and how many you can afford to support. For tax purposes, you just need to keep track of all the necessary receipts and list all your donations on your itemized tax return.

Keep in mind that charitable contributions are only one type of itemized deduction. Others may include mortgage interest, state and local taxes, and medical expenses. A Jackson Hewitt Tax Pro can help make sure you claim every deduction you can.

About the Author

Jo Willetts, Director of Tax Resources at Jackson Hewitt, has more than 35 years of experience in the tax industry. As an Enrolled Agent, Jo has attained the highest level of certification for a tax professional. She began her career at Jackson Hewitt as a Tax Pro, working her way up to General Manager of a franchise store. In her current role, Jo provides expert knowledge company-wide to ensure that tax information distributed through all Jackson Hewitt channels is current and accurate.

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