Many aren’t aware that the United States has a unique history of encouraging charitable giving through its tax policy. This in part might explain why Americans are among the most generous in the world.
While this is encouraging, it’s critical to understand the rules before you donate. To help demystify the tax code when it comes to philanthropy, we turned to our expert, David S. Burnett, CPA. As the founder and owner of Accounting Bullpen with more than 30 years of experience, he offers reliable advice. While this primer is a solid start, be sure to consult with a financial adviser to address your specific situation.
SUCCESS®: What broadly qualifies as a charitable donation for tax purposes? Are there any common misconceptions about what counts?
David S. Burnett: When it comes to deductible donations, the key is giving to IRS-recognized 501(c)(3) organizations like churches, hospitals and nonprofits such as the Red Cross or The Salvation Army. This does not include contributions of time (volunteer hours) or gifts directly to individuals. Contributions to GoFundMe campaigns are not deductible unless run by a qualified charity. Political donations are always excluded.
You can deduct donations to federal, state or local governments if the donation is made for exclusively public purposes. For example, donating to your local police department’s youth outreach program or supporting a city-run animal shelter.
Pro tip: The IRS has a handy online search tool where you can double-check if an organization is eligible.
S: Is there a cap on the amount you can deduct per year? What happens if someone donates more than that cap?
DB: The first limit is based on any tangible benefits you receive. For example, if you purchase a ticket to a gala that supports a charity, you can only deduct the amount over and above the fair market value of the meal served (even if you don’t eat it).
The second limit is based on your income. For cash donations to public charities, you can deduct up to 60% of your adjusted gross income (AGI). For noncash donations, the cap is generally 30% of AGI. If you exceed the limit, the excess carries forward for up to five years.
S: How has the One Big Beautiful Bill Act (OBBBA) impacted charitable giving for the average taxpayer?
DB: OBBBA significantly increased the standard deduction to $15,750 for single filers and $31,500 for married couples filing jointly, with future adjustments tied to inflation. This means fewer people itemize, and generally only itemizers can deduct charitable contributions. However, OBBBA also provides a charitable contribution deduction for nonitemizers. The provision creates a deduction of up to $1,000 in cash contributions for single filers who use the standard deduction ($2,000 for married filing jointly).
Finally, a new tax credit of up to $1,700 for donations to scholarship-granting organizations also begins after December 31, 2026. Credits may be taken dollar-for-dollar against income tax.
Pro tip: Rather than paying the government, many taxpayers may prefer to contribute $1,700 to organizations and programs that offer scholarships to students at the K-12 level, often with a focus on financial need or specific student populations.
S: What’s the key difference in deductibility between donating cash versus noncash assets like stocks?
DB: Cash contributions are relatively straightforward. You can deduct up to 60% of AGI. For noncash contributions, you can deduct up to 30% or 50% of AGI, depending on the type of donation. There are two kinds of noncash contributions. First are contributions of used property like household items and clothing. Here you can deduct up to the fair market value of the property, but not more than you paid for it. The key is keeping good records of what you donated and how you determined the value. That means more than simply listing “two bags of clothes.” You need to itemize what you donated and assign a “thrift shop” value.
Pro tip: There are printable online guides available to help determine the deductible value of clothing and household items.
The second kind of noncash contribution is appreciated property, like stocks. This can create a double tax benefit if the stock is held for more than a year. You can deduct the full fair market value of the stock and avoid capital gains tax on the appreciation. Again, the deduction is limited to 30% of AGI, but otherwise, this remains an attractive strategy to maximize the overall tax benefits.
S: What kind of documentation do donors need to keep for their charitable contributions?
DB: For donations of $250 or more (cash or noncash), you must have a written acknowledgment from the charity before you file your return. If you don’t, the IRS can deny your deduction, even if the gift was real.
For noncash gifts over $500, you also need to fill out Form 8283 in addition to getting the acknowledgment. Form 8283 requires more detailed information about the donation and the recipient. For noncash donations over $5,000, you’ll need the acknowledgment plus a qualified appraisal (unless the gift is publicly traded stock).
Sometimes contributions are made through an employer with payroll deductions. In this case, your W-2 plus a pledge card or other documentation from the employer-sponsored charity program is generally enough.
Pro tip: For cash gifts under $250, a bank record, credit card statement or a canceled check is sufficient. However, many charities still issue acknowledgments, which are good to keep.
S: What’s one common mistake people make when claiming charitable deductions, and what’s your top piece of advice for someone looking to maximize their giving for tax purposes?
DB: The most common mistake I see is assuming you can deduct all donations regardless of whether you itemize. Most taxpayers now take the standard deduction, making some of their gifts nondeductible. If you are close to itemizing, you can bunch your giving by combining two or more years’ worth of donations into one tax year to exceed the standard deduction and make itemizing worthwhile.
I also see taxpayers often miss the charitable miles deduction, which allows itemizing taxpayers to deduct miles driven in service of a qualified charity. If you use your personal vehicle to perform volunteer work for a 501(c)(3) organization, you can deduct the mileage driven at a fixed IRS rate (currently 14 cents per mile). Examples include driving to a Habitat for Humanity build site or to sort food donations for a food bank. The charitable mileage deduction is small but meaningful for active volunteers.
My top piece of advice is to donate appreciated assets instead of cash. Giving long-term appreciated assets can deliver two major tax benefits. First, you deduct the full fair market value (if held for more than one year), up to 30% of AGI, and second, you avoid capital gains tax you would have paid if you sold the asset first. For example, if you donate $10,000 of stock you bought for $4,000, you will get a $10,000 deduction and avoid paying tax on the $6,000 gain. This is more tax-efficient than donating $10,000 in cash.
Featured image courtesy of Black Salmon/Shutterstock
This article was first published in the November 2025 issue of SUCCESS® digital edition. Get your FREE copy here.
