Making charitable donations is a wonderful way to support causes you care about. What many people don’t realize is that the IRS offers tax benefits that can make your gift even more impactful. Understanding just a few basic rules can help ensure you get the most out of your generosity in the new year.

For a donation to be tax-deductible, it must go to a charity recognized by the IRS as a 501(c)(3) organization. This means the nonprofit is officially approved and recognized as a charitable organization by the government and doesn’t pay federal income tax.

You can easily confirm this by visiting IRS.gov or by asking the organization directly.

The IRS limits how much you can deduct each year based on your Adjusted Gross Income (AGI), but the limits are quite generous:

• Cash Donations: You can usually deduct up to 60% of your AGI.
  Example: If your AGI is $100,000, you can deduct up to $60,000 in cash gifts.

• Donations of Property (such as goods or assets): These are generally limited to 30% of your AGI.

• If You Give More Than the Limit: You don’t lose the deduction, you can carry the extra forward for up to five years.

To claim your donations, you must itemize your deductions on Schedule A of your tax return. (If you take the standard deduction, you usually can’t claim charitable contributions.)

Here’s what the IRS requires:

For Cash Gifts

• Under $250: A receipt, canceled check, or bank statement is fine.

• $250 or more: You’ll need a written acknowledgment from the charity showing the amount and whether you received anything in return.

For Non-Cash Gifts

• Over $500: You must include IRS Form 8283 with your tax return.

• Over $5,000: You may need a professional appraisal to document the item’s value.

One of the most tax-efficient ways to donate is by giving appreciated assets, such as stocks or bonds, directly from your brokerage account. Donors love this strategy because you avoid paying capital gains tax on the increase in value and you can deduct the full fair market value of the stock (subject to IRS limits). This often allows you to give more without increasing your out-of-pocket cost.

How it works: first, tell your broker you want to donate shares to a specific charity. Next, the charity receives the stock and can sell it tax-free. You get a receipt showing the stock’s value on the day it was donated. It’s simple, efficient, and a win-win for both you and the charity.

Charitable donations are reported on Schedule A (Form 1040). The total amount you deduct reduces your taxable income, which can lower the amount of tax you owe.

Before making a significant gift, especially stocks or property, it’s a good idea to talk with your tax professional. They can help you make sure your donation gives you the best possible benefit.

Your generosity makes a real difference, many charitable organizations count on the generous donations they receive year round. Thank you for supporting the causes close to your heart.