As the year winds down, charitable giving becomes a top priority for many Americans. With inboxes brimming with donation appeals, it’s worth considering how your generosity can also provide meaningful tax benefits.
The holiday season—spanning from #GivingTuesday to year’s end—is a prime time for charitable contributions, which not only support important causes but can also ease your tax burden. Here are ten actionable tips to maximize the tax benefits of your donations:
1. Bunch Your Contributions
If your annual giving doesn’t exceed the standard deduction, consider bunching—making multiple years’ worth of donations in one calendar year. For example, instead of donating $5,000 annually to your favorite charity, give $15,000 in 2024 and skip the next two years. This strategy allows you to itemize in the year of the large donation while claiming the standard deduction in off years.
2. Donate Appreciated Assets
Stocks and other appreciated assets can offer a double tax advantage. By donating assets held for over a year, you avoid capital gains taxes and can deduct the full fair market value of the asset. With the S&P 500 seeing a 24% gain in 2023, this is a savvy move for those holding high-performing stocks.
3. Utilize Donor-Advised Funds (DAFs)
A donor-advised fund lets you make a large donation in one year to maximize your deduction, while distributing funds to charities over time. DAFs are particularly useful if you’re donating appreciated assets or employing the bunching strategy. Additionally, funds in a DAF can be invested, potentially growing your charitable impact.
4. Verify Charitable Status
Ensure your chosen charity is a qualified organization for tax purposes. Use the IRS’s online tool to confirm eligibility. Even without claiming deductions, it’s wise to check a charity’s credentials. Platforms like Charity Navigator and Forbes’ Top 100 Charities list can provide insights into a charity’s financial health and transparency.
5. Keep Detailed Records
Always obtain receipts for your donations. For cash gifts, maintain bank records or written acknowledgments from the charity, specifying the amount, date, and recipient organization. Non-cash donations, like clothing or household goods, require additional documentation if valued over $500. For items exceeding $5,000, a professional appraisal is mandatory.
6. Explore Payroll Deductions
Many employers facilitate charitable giving through payroll deductions, often matching contributions to amplify your impact. Keep a pay stub or W-2 showing the total amount withheld and pair it with a pledge card from the charity for proper record-keeping.
7. Be Cautious with Donor Incentives
If a donation includes receiving goods or services—like event tickets or gifts—only the amount exceeding the value of these items is tax-deductible. Charities typically provide this information in donation receipts.
8. Leverage Qualified Charitable Distributions (QCDs)
If you’re 70½ or older, consider making a Qualified Charitable Distribution directly from your IRA. This tax-efficient strategy counts toward your Required Minimum Distributions (RMDs) but isn’t included in taxable income. In 2025, the QCD limit increases to $108,000, with a one-time $54,000 option for split-interest entities.
9. Deduct Volunteer Expenses
While you can’t deduct the value of your time, certain out-of-pocket expenses related to volunteering are deductible. These include travel costs, parking fees, and tolls. The mileage rate for charitable service in 2024 is 14 cents per mile. Keep detailed records to substantiate your claims.
10. Mind the Calendar
For donations to count in the current tax year, make them by December 31. This includes text donations charged to your wireless account, credit card contributions, and mailed checks—so long as the check is postmarked before year-end. Intentions alone don’t qualify; the transaction must be completed.
Final Thoughts
Despite changes in tax laws, charitable giving remains a rewarding way to support meaningful causes and secure tax benefits. Whether you’re bunching donations, exploring donor-advised funds, or making Qualified Charitable Distributions, planning is key.
For significant or complex contributions, consult a financial advisor to align your giving strategy with your financial goals. This holiday season, give thoughtfully and make your generosity count—for your chosen charities and your taxes.
