How charitable giving affects your taxes

Charitable contributions reduce taxable income only when you itemize deductions on Schedule A of Form 1040. The deduction you claim depends on what you give (cash, publicly traded stock, or other property), the organization’s tax-exempt status, and annual limits tied to your adjusted gross income (AGI).

Key rules in plain language:

  • Itemize to deduct. You must itemize deductions to claim charitable contributions. If the standard deduction is larger than your itemized total, you won’t receive an extra tax benefit from donations on your federal return. (See IRS Pub. 526.)
  • Contribution limits. For most cash gifts to public charities, the deduction limit is generally up to 60% of AGI; for donations of appreciated long-term capital gain property (like stock) to public charities, the limit is usually 30% of AGI. Different limits apply to gifts to certain private foundations, veterans’ organizations and similar entities. (IRS, Charitable Contributions.)
  • Business vs. individual gifts. Corporations have different limits (generally 10% of taxable income) and different rules for valuation.

These rules are current as of 2025. For full IRS guidance, see the Charitable Contributions overview and Publication 526 on the IRS website (irs.gov/charities-non-profits/charitable-contributions; IRS Publication 526).

Documentation the IRS requires and why it matters

The IRS expects taxpayers to substantiate charitable deductions. Missing or inadequate records are the top reason gifts are disallowed in audits. Below is a practical checklist organized by donation type and dollar thresholds.

Checklist — Records to keep

  • Cash donations (any amount): bank record (canceled check, bank statement, or credit card statement) or written communication from the charity showing name, date, and amount. (IRS Pub. 526)
  • Donations of $250 or more: a contemporaneous written acknowledgment from the charity is required. It must state the amount of cash and whether you received any goods or services in return. Without this, the deduction is disallowed. (IRS Pub. 526)
  • Noncash donations over $500: you must complete Form 8283 when filing your return and keep a receipt showing description, condition, and donor information.
  • Noncash donations over $5,000: generally require a qualified appraisal and attach Section B of Form 8283 to your return (exceptions apply to publicly traded securities). See Publication 561 for valuation rules.
  • Vehicle donations: if your deduction is more than $500, the charity must give you Form 1098-C or a written acknowledgment that includes the vehicle identification number (VIN) and how the charity used the vehicle. If the charity sells the vehicle, your deduction is limited to the sale proceeds rather than fair market value.
  • Bargain sales (partial donations): keep copies of the purchase/sale agreement and a written statement from the charity.

Keep these records for at least three years from the date you file, and longer (up to six years) if you underreport income — IRS rules can vary depending on the situation. (IRS, recordkeeping guidance.)

Common donation types and how the tax rules treat them

1) Cash gifts (checks, credit card, electronic transfer)

  • Easiest to substantiate: bank or card records plus, for $250+, a written acknowledgment.
  • Deduction limit: generally up to 60% of AGI for gifts to public charities.

2) Appreciated publicly traded securities

  • Often a tax-efficient strategy: donating long-term appreciated stock to a public charity allows you to deduct the stock’s fair market value and avoid capital gains tax on appreciation, subject to the 30% AGI limit for gifts of appreciated property.
  • Example: Donating stock bought at $6,000 and worth $10,000 may allow a $10,000 deduction while avoiding capital gain tax on the $4,000 appreciation, provided the stock was held long-term and other rules are met.
  • See our guide on Charitable Gift Strategies for Highly Appreciated Assets for more detail: https://finhelp.io/glossary/charitable-gift-strategies-for-highly-appreciated-assets/

3) Tangible personal property (furniture, clothing, collectibles)

4) Vehicles

  • If the charity sells the vehicle shortly after donation, your deduction is limited to the gross proceeds from the sale unless the charity indicates it will use the vehicle in a way that materially advances its exempt purpose. The charity’s written acknowledgment (or Form 1098-C) tells you which rule applies.

5) Donor-Advised Funds (DAFs) and private foundations

  • DAFs: You get a deduction when you contribute to the DAF, but distributions from the fund to operating charities are not additional tax deductions. Deduction limits for cash to DAFs are typically 60% of AGI, similar to public charities.
  • Private foundations: gifts to private foundations usually carry lower AGI percentage limits and stricter valuation/appraisal rules.

Practical strategies (what I recommend in practice)

  • Batch (or “bunch”) donations: If your itemized deductions hover close to the standard deduction, consider bunching multiple years’ worth of donations into one year (often via a DAF) so you itemize that year and take the standard deduction the next year. This is a common strategy after the TCJA raised the standard deduction. (See our post on Charitable Giving Calendars for timing ideas: https://finhelp.io/glossary/charitable-giving-calendars-timing-donations-for-tax-efficiency/)

  • Give appreciated assets when possible: Donating long-term appreciated stock or mutual fund shares is often more tax-efficient than selling and donating the cash because you avoid capital gains tax and may deduct the full market value.

  • Keep contemporaneous acknowledgments: For any gift $250 or greater, request the charity’s written acknowledgment at the time of the gift and save it with your tax records. This step prevents headaches during audits.

  • Use electronic records and a simple tracker: Maintain a spreadsheet or personal finance software category for donations; export statements and store receipts in a labeled folder (digital or physical). For year-end tax prep, this saves time and reduces chance of missing items.

Real-world examples

  • Appreciated stock donation: A donor gifts $10,000 of long-held appreciated stock to a public charity. They can generally claim a $10,000 deduction (up to AGI limits) and avoid capital gains tax that would have applied if they sold the stock first.

  • Vehicle donation: A donor gives an old car to a charity. The charity’s Form 1098-C shows the car was sold for $1,200, so the donor’s deduction is limited to $1,200 regardless of a higher claimed fair market value.

  • Bunching example: A couple who usually takes the standard deduction decides to bunch two years of donations into one tax year using a donor-advised fund, allowing them to itemize in that year and claim the standard deduction the next.

Red flags and common mistakes to avoid

  • Relying on oral confirmations. Always get written acknowledgments for $250+ contributions.
  • Inflating noncash values. Overstating fair market value for donated clothing or collectibles invites disallowance or penalties; when in doubt, get a qualified appraisal.
  • Skipping Form 8283 when required. For noncash gifts over $500, failing to complete and attach Form 8283 can cause the deduction to be questioned.

Where to confirm rules and get forms

For tax policy context on how the Tax Cuts and Jobs Act changed itemizing behavior, see analysis from the Tax Policy Center.

Professional disclaimer

This article explains common federal rules and record-keeping practices as of 2025 for educational purposes and does not substitute for personalized tax or legal advice. For questions about your situation, consult a licensed tax professional, enrolled agent, or CPA.

Authoritative sources cited

  • Internal Revenue Service, Charitable Contributions and Publication 526 (irs.gov/charities-non-profits/charitable-contributions)
  • IRS Publication 561, Determining the Value of Donated Property
  • Tax Policy Center analysis of TCJA effects

Further reading on FinHelp