Charitable Contributions: How and when are they deductible?
Charitable contributions are deducted on schedule A, “Itemized Deductions”, of a personal tax return. A taxpayer will itemize when their itemized deductions exceed the standard deduction for that tax year; under the current law (TCJA) the standard deduction for 2023 is $13,850 for a single taxpayer and $27,700 for married filing joint.
Not all donations are deducible on a tax return. So, when is a donation considered charitable per the IRS? The IRS allows for donations made to 501© organizations to be included on the sch A of an individual tax return. Most non-profits will advertise if donation to them is tax deductible. Depending on the size of your donation and the charity, you may receive a letter at the end of the year with your total contributions. Please provide this letter with your tax documents as support for charitable giving. Please note, if you are a member of a charitable organization and pay dues, check with your organization as not all dues are deducible if you receive a benefit (such as meals/snacks or discounts) paid out of those dues.
If you are donating non-cash items, such as clothing or home goods, make sure you are given a receipt with a “donation value” listed. In addition to the receipt, I recommend taking a picture of what was donated so you have proof of what was donated and the condition to support the value taken as a deduction on your return. If a non-cash donation exceeds $500, a valuation or appraisal is needed to be provided with the return. Some examples of this would be a donation of a car, large furniture, or stock.
Please note, GoFundMe is NOT a charitable contribution. Giving a donation to pay for someone’s medical bills, raising money, or anything similar to that is considered a gift and not deductible. Gifts to an individual are not deductible. If you are donating to a person to go on a trip, such as a mission trip, I recommend giving the money directly to the organization/church they are going thru as that may be deducible whereas just writing a check to the individual to help with cost isn’t.
So what else is an itemized deduction that may make me itemized your return? The five categories of itemized deductions are:
1) Medical Expenses (limits and rules apply, separate blog post to come for more details)
2) State & Local Taxes (currently capped at 10K, referred to as the SALT Cap)
3) Mortgage Interest
4) Charitable Contributions
5) Casualty & Theft Losses (from a Federally declared disaster)
6) Other Miscellaneous – i.e., Gambling losses (separate blog post to come for more details on gaming income and losses)
With the passing of the Tax Cuts & Jobs Act (“TCJA”) in 2017 there was a significant jump and change to the standard deduction. It is important to note that the increase in the standard deduction for individuals from TCJA is set to sunset in 2025 unless extended by Congress.