Tax Tip Tuesday: How Donating to Charity Can Save You Money on Taxes

Donating to charity feels good — and when you plan it well, it can help you save on taxes too. Here’s what every taxpayer should know about making the most of charitable giving.

What Donations Are Deductible?

First, only donations to qualified charities — usually IRS-recognized 501(c)(3) nonprofits — are deductible. This includes most religious organizations, schools, hospitals, and reputable charities. Political donations and gifts to individuals generally do not qualify.

You Must Itemize

To claim a deduction for your charitable gifts, you must itemize deductions on your tax return. If you take the standard deduction, you can’t also claim charitable donations.

How Much Can You Deduct?

Cash donations to public charities are generally deductible up to 60% of your Adjusted Gross Income (AGI). Non-cash donations like clothing, furniture, or stocks are usually capped at 20%–50% of AGI, depending on the asset and charity type.

Smart Ways to Give — And Save More

Donating cash is straightforward — but here are some tax-savvy strategies many taxpayers overlook:

1. Donate Appreciated Stocks or Mutual Funds: Donating long-term appreciated stocks or mutual funds directly from your brokerage can be more tax-efficient than giving cash.

• You get a deduction for the fair market value.

• You avoid paying capital gains tax on the growth.

  
  

Example: If you bought shares for $2,000 that are now worth $10,000, donating them gives you a $10,000 deduction — and you skip capital gains tax on the $8,000 profit.

2. Use a Donor-Advised Fund (DAF): A DAF acts like a charitable investment account. You donate cash or assets now and get an immediate deduction, then recommend grants to charities over time.

This is great if you want to “bunch” multiple years of donations into one tax year to exceed the standard deduction threshold, then give to charities over several years.

3. Make a Qualified Charitable Distribution (QCD): If you’re 70½ or older, you can donate directly from your IRA to a charity — up to $100,000 each year.

A QCD counts toward your Required Minimum Distribution (RMD) but is excluded from taxable income. This can help reduce your tax bracket and avoid higher taxes on Social Security or Medicare surcharges.

4. Donate Non-Cash Items or Property: Donations don’t have to be cash. Clothing, furniture, cars, or even real estate can be donated. You can deduct the fair market value, but you’ll need good records and possibly an appraisal for large items.

5. Automate Your Giving: Some employers and brokerages allow you to set up recurring donations. Automatic giving helps you stay consistent, spread out your impact, and makes recordkeeping easier at tax time.

Keep receipts for all donations. For cash donations over $250, you’ll need a written acknowledgment from the charity. For non-cash donations over $500, you must file IRS Form 8283 with your return.

Charitable giving is a powerful way to help others — and with a smart plan, you can maximize your tax savings too. If you’d like help figuring out whether donating stocks, setting up a donor-advised fund, or making a QCD makes sense for you, we’re ready to help. You can reach out to us at info@mkhstaxgroup.com.