How to Ensure Your Charitable Donations Are Tax Deductible

Giving money to charity is wonderful, but don't do it for the tax breaks. A few years ago, it was easier for everyday people to get a little tax break for donating to charity. But the 2017 Tax Cuts and Jobs Act (TCJA) changed the rules and made it harder for most people to claim tax deductions for charitable donations.

Let's look at what it takes to make sure your charitable donations are tax deductible.

1. Itemize your deductions (if it makes sense to)

First of all, your charitable donations are tax deductible only if you are itemizing your deductions. But most people don't itemize.

You should take whichever deduction (standard or itemized) reduces your taxable income by the largest amount. Recent IRS data shows that approximately 90% of tax returns take the standard deduction.

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For the 2023 tax year, the standard deduction is:

• $13,850 for single filers and married people filing separately
• $20,800 for head of household filers
• $27,500 for married filing jointly

In order for itemized deductions to be the right choice for your tax situation, your itemized deductions need to equal more than the standard deduction. And for most people that's unlikely to happen. Types of deductions that can be listed in itemized deductions include:

• State and local income taxes (like real estate taxes or local property taxes)
• Mortgage interest
• State and local sales taxes (this could include sales tax for a major purchase like a new vehicle)
• Personal property taxes
• Disaster losses
• Some medical and dental expenses (if they exceed a certain percentage of your adjusted gross income)
• Gifts to charities

The average taxpayer's itemized deductions rarely add up to be more than the standard deduction. Most people cannot donate enough money to charity to make itemizing worthwhile.

Why it's hard to itemize deductions: Two examples of taxpayers

Example taxpayer No. 1: This taxpayer is single, with an income of $50,000. They rent their home. Because they're not a homeowner, this person is already missing out on most of the itemized deductions. And let's say that they live in a state with no state income tax, so they don't get to itemize that number either.

This person donates a generous 10% of their income to charity ($5,000), and has a total of $5,000 in other itemized deductions like local sales taxes or excess medical bills.

Here's what it looks like when you add up your itemized deductions:

As you can see, this person's itemized deductions add up to only $10,000 -- which is less than a single person's standard deduction of $13,850. In this scenario: Don't itemize! Take the standard deduction instead. But you can't count your charitable contributions as tax deductible.

Example taxpayer No. 2: A married couple filing jointly has a combined income of $125,000. They own their home, and they live in a state with income tax and high local property taxes. Let's say this couple paid $12,000 of state and local property taxes, $4,000 of mortgage interest, and they donated $10,000 to charity. Because of the $10,000 cap on SALT (state and local tax) deductions, they can only itemize $10,000 of their $12,000 state and local property taxes.

So in this case, this married couple can try to itemize:

$24,000 sounds like a lot, right? They can get a nice tax break for those charitable contributions, right? Wrong! Rather than itemizing their deductions, they too should take the standard deduction ($27,500). This couple's $10,000 of charitable donations were a wonderful gesture, but from a tax standpoint, they might as well not exist.

If you're a higher-income, higher-net-worth household that makes massive contributions to charity, to the point that your total itemized deductions are greater than the standard deduction, you will likely be able to claim tax-deductible charitable donations on your tax return.

2. Donate to 501(c)(3) nonprofit organizations

Here's another fundamental of tax deductible charitable donations: You must donate to a qualified tax exempt organization that can receive tax deductible donations. These are called 501(c)(3) nonprofit organizations.

These can include a wide range of charities and nonprofits, including churches and religious groups, education organizations, museums, scholarship funds, colleges and universities, schools, veterans' organizations, and more. If a nonprofit is a 501(c)(3), it will usually tell you.

3. Keep good records and file necessary IRS forms

To claim a tax deduction for charitable donations, you need to keep good records of your donations. This can be a paper receipt, a bank statement, or an electronic receipt provided by the nonprofit.

If you've made any donations of $250 or more, the IRS rules require you to keep a receipt. If you've made non-cash contributions of $500 or more, you have to file additional IRS forms. For larger donations, you might want to consult an accountant or tax attorney to claim the correct tax deduction.

Bottom line: Many American taxpayers don't benefit from tax-deductible charitable donations. That doesn't mean you should stop giving to charity! But tax deductions for charitable donations are likely to go to higher-net-worth people who can afford to give more money away.