How to deduct charitable contributions on your taxes

M1 Team
M1 Team February 12, 2024
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If you’ve donated to a charitable organization in the last year, you may be eligible for a tax deduction. For the tax year 2023, the deduction limit on charitable contributions is up to 60% of the taxpayer’s adjusted gross income (AGI). The specific percentage will vary depending on the type of contribution and the organization. You could take a deduction for noncash charitable contributions up to 50% of your AGI—however, depending on the type of organization and type of charitable gift, it could be limited to 20-30% of your AGI.

Charitable contributions to tax-exempt organizations (as defined by section 501(c)(3) of the Internal Revenue Code) can be claimed as itemized deductions on Schedule A of IRS Form 1040. This may include religious organizations and nonprofit organizations. In addition to deducting cash donations, you can also typically deduct the fair market value of any other property you donate to qualifying organizations.

You can only claim the tax deduction for charitable contributions if you itemize your tax return. If you claim the standard deduction, you won’t be able to itemize your tax return and therefore you won’t be able to write off charitable contributions. However, for most people, the standard deduction is more beneficial than itemizing.

For the 2023 tax year, which will be the relevant year for April 2024 tax payments, the standard deduction is:

  • $13,850 for single filing status
  • $27,700 for married, filing jointly
  • $13,850 for married, filing separately
  • $20,800 for heads of households

If you plan to itemize contributions, including those for charitable donations, read on.

How to claim the tax deduction for charitable donations

To start off, you’ll want to make sure you have a record of any donations you’ve made to qualified organizations throughout the year. Records should specify the name of the organization, the amount donated, and the date of the donation. If you’ve made contributions greater than $250, a written acknowledgement from each qualified organization indicating the amount donated and a description of any non-cash contributed will be required.

The acknowledgement should also note if you received any benefits in return for your donation, and if so, should provide details and the value of goods or services received. If you received a benefit in exchange for your donation, you can only deduct the amount that exceeds the fair market value of the benefit you received.

The IRS provides several calculations and special rules for determining the fair market value of a charitable contribution. Learn more about how to determine FMV here.

Donations will be itemized on Schedule A (Form 1040), but for non-cash donations greater than $500, you also need to fill out Form 8283.

For non-cash donations, if you claim a deduction between $500–$5000 per item, you’ll need to fill out Form 8283, Section A. If the deduction is greater than $5,000 per non-cash item, you’ll need to fill out Form 8283, Section B and get a qualified appraisal of the item. Typically, you do not need to attach the appraisal to your return, but there are certain instances where you would need to. Such instances include when art donated is worth more than $20,000, when clothes or household items donated are not in good condition, or if you make a deduction of greater than $500,000 (unless an exception applies).

For a donation to be eligible for deduction when you file your tax return this April, it must have been made by Dec. 31, 2023. This means it must have been delivered to the qualified institution by the end of the year. If you aren’t sure what the delivery date of your donation might be, the IRS has established the delivery dates for a donation as follows:

  • Donations made by check: The day the check was mailed, not received.
  • Donations made by credit card: The day the charge was made/processed, not when the bill was paid.
  • Stock donations: The day the broker transfers the gift to the charity.
  • Option donations: The day the option is exercised by the charity.

This article is for educational purposes only and should not be taken as tax advice. Speak to a licensed tax professional for tax advice.

Disclosures:

All examples above are hypothetical, do not reflect any specific investments, are for informational purposes only, and should not be considered an offer to buy or sell any products. M1 does not provide any financial advice.  

All investing involves risk, including the risk of losing the money you invest. Brokerage products and services are offered by M1 Finance LLC, Member FINRA / SIPC, and a wholly owned subsidiary of M1 Holdings, Inc.

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