Post updated April 2023
So long as there has been disaster and tragedy in the world, there have been helpers. As the patron saint of niceness himself, the Mister Rogers, once famously said on Mister Rogers’ Neighborhood: When I was a boy and I would see scary things in the news, my mother would say to me, “Look for the helpers. You will always find people who are helping.” In troubling times, it helps to look for the helpers. It helps even more to be one of them—not only morally, but sometimes financially as well.
There are two universal constants throughout human history, from the dawn of civilization to today: one, people like to help others; two, people hate paying taxes. Tax deductions for charitable donations are the cherry on top of the good feeling you get from being one of the helpers—a little bit of extra good karma sent your way courtesy of Uncle Sam.
But not all good deeds get you good results on your tax return.
How much do charitable donations reduce taxes?
Tax deductions for charitable donations are a complicated affair, with a lot of rules and technicalities influencing how much you can save from your donations and in which cases.
Generally speaking, you can deduct up to 50% of your adjusted gross income via charitable donations, although in some cases, you may be limited to 20 or 30%. Charitable contributions can only reduce the amount you owe if you itemize your taxes.
What qualifies as a charitable donation?
Whenever you make a charitable donation, don’t forget to read the fine print. Your donation is only qualified for tax write-offs if you give them to eligible organizations. They must receive the 501(c)(3) stamp from the IRS in order to be considered a “charitable organization” and qualify for a deduction.
Donating to your niece’s book club embarking on a mission trip to rebuild a Florida library after a hurricane is inarguably a worthy cause, but it will not qualify you for a write-off.
Let’s take a look at our lovely, tax-exempt bachelors, who do qualify:
- Churches, synagogues, temples, mosques, and other religious organizations
- Federal, state, and local governments, if your contribution is solely for public purposes, such as a gift to reduce the public debt or maintain a public park
- Nonprofit schools and hospitals
- The Salvation Army, American Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts of America, Girl Scouts of America, Boys & Girls Clubs of America, and other 501(c)(3) organizations.
- War veterans’ groups
- Expenses you paid for a student living with you who is sponsored by a qualified organization
- Out-of-pocket expenses for serving as a volunteer for a qualified organization
What does not qualify as tax deductions for charitable donations?
On the other hand, here are the types of organizations that do not qualify as charitable contributions on your tax return:
- Civic leagues, social and sports clubs, labor unions, and chambers of commerce
- Foreign organizations, except certain Canadian, Israeli, and Mexican charities
- Groups that are run for personal profit
- Groups that lobby for law changes
- Homeowners’ associations
- Individuals
- Political groups or candidates running for public office
- Costs of raffle, bingo, or lottery tickets
- Dues, fees, or bills you paid to country clubs, lodges, fraternal orders, or similar groups
- Tuition
- Value of your time or services for volunteering
- Value of blood given to a blood banks
That isn’t to say, of course, that these aren’t good and noble causes to contribute toward—just that you won’t get any tax benefits out of them.
Can you deduct charity if you don’t itemize your contributions?
In general, you have to itemize your donations in order to get a tax deduction for them. Your deductions must be itemized on IRS form Schedule A (Form 1040), Itemized Deductions. The only form of deduction that does not require itemization is the standard deduction, a fixed amount that the IRS allows you to deduct from your income, no-questions-asked, based on certain deductible expenses.
Sometimes itemizing your standard deductions results in a bigger overall tax deduction, even if it’s easier to take a standard deduction without itemizing. The reverse is not true for charitable deductions. You can only receive a charitable tax deduction if you have itemized your deductions.
To itemize your charitable deductions, all you have to do is list them on Schedule A (Form 1040), which you can see above.
Charitable donations aren’t the only things you can itemize. Medical and dental expenses, state and local taxes, real estate mortgage interest, gifts, and casualty and theft losses from a federally declared disaster can also be itemized.
When itemizing any sort of deduction, be sure to compare it to your standard deduction. If your itemized deductions total more than your standard deduction, there’s little point in actually taking them, as you will only receive whichever deduction is greater, not both. On the other hand, if your itemized deduction is greater than your standard deduction, you have every reason to take that deduction over your standard deduction!
Whenever you send a tax-deductible charitable gift, be sure to keep a record of it. If an IRS auditor questions your donation (the nerve) and you don’t have documentation, you could lose the deduction. In 2007, Congress increased reporting requirements for charitable donations and granted the IRS the means to automatically reject undocumented contributions.
In case anything should happen to physical documentation, be sure to scan all related documents into a digital folder. Don’t give the IRS a reason to steal your good karma.
Staying On the Lookout for Charity Scams
In addition to unqualified charities, the IRS warns unassuming taxpayers to be cautious of criminals who are attempting to capitalize off your munificence in the wake of a natural disaster. According to the IRS, this is how scammers can saunter their way into the lives of unassuming victims:
- Some impersonate charities to get money or private information from well-intentioned taxpayers.
- Bogus websites use names similar to legitimate charities to trick people into sending money or providing personal financial information they can then take advantage of.
- They claim to be working for or on behalf of the IRS to help victims file casualty loss claims and get tax refunds.
- Others operate bogus charities and solicit money or financial information by telephone or email.
To ensure that you’re donating to legit charities and not the pizza fund of a 50-year-old guy living large in his mom’s basement off the good faith of others, check out the IRS search database: Tax Exempt Organization Search. This database contains a list of every registered organization with the IRS and informs you whether or not it is eligible to receive tax-deductible charitable contributions. If anything seems suspicious, double-check.
In summary: Stay informed. Keep those receipts. Avoid sending cash. Keep doing your part in making the world a better place. We commend you for it.
Need help dealing with the IRS about your tax deductions for charitable donations? We’re tax law professionals who break down tax issues that seem impossible into solvable problems. We will evaluate your situation, recommend a course of action, and help you out however we can to resolve your situation. Don’t wait—contact us today for a consultation!