Chances are that your inbox is full of reminders to make your end-of-year charitable donations. After all, ‘tis the season, right? The annual giving season kicked off on #GivingTuesday (the Tuesday after Thanksgiving) and charitable organizations hope to carry the momentum through the end of the year. That timing works out for tax purposes, too.
Giving USA, in its annual report, estimates that giving by individuals, bequests, foundations, and corporations to U.S. charities hit $557.16 billion in 2023—an increase of 1.9% in nominal dollars, but down 2.1% when adjusted for year-over-year inflation. Similarly, giving by individuals—the largest category of funders by total dollar amount—was up 1.6% to $374.4 billion, but down 2.4% when adjusted for inflation. Moreover, the total number of individuals giving dropped by 3.4%.
This is notable because it isn’t representative of the economy. Usually, giving rises with the economy and with stock gains—in 2023, the S&P 500 generated a 24% gain.
There may be a variety of explanations for the giving drop, but many point the finger at the 2017 tax reform. Under the Tax Cuts and Jobs Act (TJCA), the standard deduction for individuals nearly doubled and has continued to grow to keep pace with inflation. In 2025, the standard deduction amounts will increase to $15,000 for individuals and married couples filing separately; $30,000 for married couples filing jointly; and $22,500 for heads of household. (You can see the 2024 standard deductions here.) At the same time, the 2017 law put new limits on some other itemized deductions. That means fewer taxpayers are itemizing—and you must itemize your deductions on Schedule A to claim a charitable deduction.
Many Americans donate even if they can’t claim a tax deduction. Some of the tax rules that apply to charitable donations—like checking to see that the organization has its paperwork in order—are good rules to follow even if you’re not claiming a tax deduction.
No matter whether you’re hoping for a tax break on your gift, or just feeling generous, here are some tips to keep in mind as you give this year:
If you’re looking for a deduction, consider bunching your gifts. If you’re not giving enough each year to make itemizing worthwhile, consider bunching your gifts—making a significant donation in one year to take advantage of the deduction and giving less in other years. For example, if you always give $5,000 to your alma mater, consider giving $15,000 in 2024 and skipping the next two years.
Consider donating appreciated assets. Donating property that has appreciated in value, like stock, can result in a double tax benefit. Normally, appreciated assets are subject to capital gains tax when you sell. But when you donate appreciated assets to charity, you avoid paying capital gains tax and can claim a charitable deduction (if you itemize) for the full value of the asset—so long as you’ve owned it for at least one year. With the S&P up more than 25% this year and the top gainers doing way better, donating a hot stock could be a win-win for your favorite charity and your taxes.
Invest in a donor-advised fund. A donor-advised fund, or DAF, can be an excellent option for charitable giving, particularly if you are bunching donations or donating a big chunk of appreciated stock. A DAF is an account established at a public charity. Donating to a donor-advised fund makes you generally eligible for an immediate tax deduction even if the funds aren’t immediately turned over to charity. The funds in a DAF are typically invested, and you can make grant recommendations to any qualified public charity. dribbling the money out over time. A DAF is a great vehicle to use if you want to get a deduction this year, but spread out your support to individual charities over several years.
Choose carefully. Remember, for federal income tax purposes, only donations to qualified charitable organizations are deductible. And even if you don’t plan on the deduction, it’s a good idea to check out the credentials of a potential charitable organization before you donate. If you’re looking for a tax break, you can always confirm an organization’s charitable status through the IRS website using its Search Tool. You also can confirm charitable status by calling the IRS toll-free at 1.877.829.5500. Keep in mind that churches, synagogues, temples, and mosques are considered de facto charitable organizations and are eligible to receive deductible donations even if they’re not on the list—some exceptions apply, so be sure and ask if you’re not sure. Some sites, like Charity Navigator, can give you more information (including a peek tax returns and financials) about organizations you hope to support. You can also consult Forbes’ list of America’s Top 100 Charities—and can apply the financial ratios we include in the list to charities that aren’t on it.
Get a receipt—even for cash. As a best practice, always ask for a receipt. Almost any charitable organization will happily offer you one. You don’t have to submit this documentation along with your tax return, but you need to be prepared to provide it in case of an audit. Cash donations, no matter the amount, must be substantiated by a bank record such as a canceled check or credit card receipt, clearly annotated with the name of the charity or in writing from the organization. The writing must include the date, the amount, and the organization that received the donation.
Don’t overlook payroll deductions. Your employer may participate in a charitable giving program that allows you to make contributions directly from your paycheck—many companies even match your donation, increasing your impact. If you make a contribution by payroll deduction, record-keeping requirements require that you retain a pay stub, form W-2, or other document furnished by your employer that shows the total amount withheld as a charitable donation, along with the pledge card that shows the name of the charity. For federal workers, a pledge card with the name of a Combined Federal Campaign will meet these requirements.
Pay attention to donor incentives. A charitable donation is deductible only to the extent that the donation exceeds the value of any goods or services received in exchange. If you make a donation and receive something in exchange—anything from a coffee mug to a plated dinner—you can only deduct the cost of your donation less the value of the item received. If you’re not sure of the value of an item or service received after a donation, just ask. Most charitable organizations will do the math for you and document the value of your donation in their thank you letter or receipt.
Don’t forget about retirement assets. Typically, if you want to donate from your IRA, you’d have to withdraw those funds, pay the tax, and then make the donation. There is an exception: If you are 70 1/2 or older, a qualified charitable distribution (QCD) allows you to roll funds directly from your IRA to a qualified charity. Those amounts can be used to satisfy your required minimum distributions (RMDs) for the year, and the amount donated is excluded from your taxable income—you won’t even have to itemize to do it. The total amount of QCDs that you can exclude from your gross income is increasing to $108,000 in 2025, up from $105,000 in 2024. In addition, as part of SECURE 2.0, you can make a one-time election for a QCD to a split-interest entity. That amount was initially $50,000, but adjusted for inflation, it will be $54,000 in 2025, up from $53,000 in 2024.
You can’t deduct the value of your time. The IRS does not allow a charitable deduction for volunteering your services, even if you can easily put a dollar amount on your time. So if, as an architect, you usually charge $350 per hour and use that time to help a qualified charitable organization, you’re allowed a deduction of $0—that’s not a typo. The same rule applies whether you’re a lawyer, doctor, artist, nurse, accountant, or writer at Forbes.
You can deduct expenses related to volunteering. While you can’t deduct the value of your time, most out-of-pocket expenses relating to volunteering are deductible so long as they’re not reimbursed to you or considered personal. Out-of-pocket charitable expenses that might be deductible include parking fees and tolls and other travel expenses. For 2024, the rate for mileage driven in service of charitable organizations is just 14 cents per mile. The rate is currently fixed by Congress and has never been adjusted for inflation—which is why it hasn’t budged in years, even though gas is more expensive. (It’s worth noting that the 2024 standard mileage rate for business is 67 cents per mile—some organizations will reimburse you for your mileage related to volunteering at a rate they have set themselves and may look to the business mileage rate as a mark of what’s reasonable.) As with other donations, keep good records for out-of-pocket expenses—documentation is critical.
Keep great records. Good records are always important when it comes to charitable giving, but even more so when it comes to donations of noncash items. You can generally take a deduction for the item’s fair market value—the price a willing buyer would pay to a willing seller. If you’re self-documenting the donation because it’s less than $500, be specific, noting the description and condition of the items. If you contribute property worth more than $5,000, you must obtain a written appraisal of the property’s fair market value. If you make noncash contributions (generally over $500), you may also be required to fill out one or more parts of Form 8283, Noncash Charitable Contributions.
Limits may apply. The amount you can deduct for charitable contributions is generally limited to no more than 60% of your adjusted gross income. Your deduction may be further limited to 50%, 30%, or 20% of your AGI, depending on the type of property you give and the type of organization you give it to.
Check the calendar. That means that to make your gifts count during the tax year, you must make them by December 31. Some rules apply. For example, contributions made by text message are deductible in the year you send the text message if the contribution is charged to your telephone or wireless account. Credit card charges—even if they’re not paid off before the end of the year—are deductible so long as the amount is captured by year-end. Similarly, checks written and mailed by the end of the year will be deductible for this year even if they aren’t cashed in 2024. But good intentions alone don’t count—making announcements that you intend to donate assets will not qualify for a deduction in the current tax year unless you make good on the pledge during the year.
The end of the year is a good opportunity to try your hand at charitable giving—it’s easy, for example, to make cash gifts. But if you’re considering more significant gifting, including long-term projects like trusts, pledges, or charitable foundations, reach out to an advisor who can help you identify and work toward your charitable goals.