In 2024, individuals gave over $392 billion to charities1. When adjusted for inflation, six of the nine nonprofit sectors received donations that exceeded pre-pandemic levels. While altruism drives some of this generosity, it is also fueled by the charitable contribution (donation) deduction. To help you better serve your clients when providing tax preparation or planning services, we’re providing a deep dive into charitable contribution deductions and applying them on the 1040.
Table of contents
- Understanding the charitable contribution deduction
- What donations are eligible for the charitable contribution deduction?
- Meeting the deadline
- Calculating the charitable contribution deduction (by type)
- Limits on deductions
- Claiming the deduction on non-cash charitable contributions
- Tax planning strategies
- Updates to the charitable contribution deduction under the OBBBA
Understanding the Charitable Contribution Deduction
This deduction is valuable to taxpayers because charitable contributions create multiple tax savings by reducing income taxes, escaping gift taxes, and reducing the value of the estate subject to estate taxes. Beginning in 2026, taxpayers who do not itemize deductions may be able to deduct up to $1,000 of cash contributions ($2,000 for married couples filing jointly) to certain qualified organizations from their adjusted gross income (AGI), subject to the final statutory language and IRS guidance.
Prior to the One Big Beautiful Bill Act being signed into law, fewer individuals were itemizing, which reduced the number of taxpayers benefitting from the charitable contribution deduction. As a result, careful planning can help taxpayers preserve the deduction where available and maximize its value. IRS data and guidance also confirm that charitable giving is heavily concentrated at the end of the year, so timing can also matter.
What Donations Qualify for the Charitable Contribution Deduction?
Taxpayers can deduct charitable contributions only if they are made to a qualified organization that has been granted tax-exempt status by the IRS. Generally, these organizations include nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals.
Individuals are not qualified organizations, even if the money is collected through a crowdfunding platform (e.g., GoFundMe). Contributions made to individuals are generally considered gifts, not charitable contributions deductible under section 170.
A qualified organization is generally a U.S. charity, but some foreign organizations may qualify under limited treaty-based or statutory rules. Taxpayers should verify the organization's status using the IRS’ Tax Exempt Organization Search Tool2 and, when appropriate, a determination letter or other current documentation.
Charitable contributions must also be paid in cash or other property. Taxpayers can't deduct the value of time and personal services they provide to charities, but unreimbursed out-of-pocket expenses associated with performing services may be deductible if they are directly connected with, and solely attributable to the services performed. the expenses are property and can be deducted. For example, auto expenses can be deducted at $0.14 per mile.
Donating the use of property, such as a week’s use of a timeshare, is not considered a donation of property eligible for the deduction. Additionally, taxpayers generally must donate their entire interest in the property, subject to the statutory exceptions for split-interest and partial-interest arrangements for the contribution to be deductible.
Quid Pro Quo Contributions
Quid pro quo contribution occurs when a taxpayer makes a payment partly as a charitable contribution and partly in exchange for goods and services. When this occurs, the deductible amount is generally limited to the amount paid over the fair market value of what the donor receives.
For example, many taxpayers contribute to organizations by making donations that enable them to attend a black-tie gala that includes a meal and cocktails. In this case, the taxpayer must reduce the charitable contribution by the value of the meal and other benefits received. The charity's disclosure rules and the donor's deduction rules are related but distinct, so the donor must still substantiate the payment properly.
Meeting the Charitable Contribution Deduction Deadline
Charitable contributions must be paid by the end of the tax year. This rule also applies to individuals who are accrual-basis taxpayers. Payments made by check is generally considered paid on the date the check is mailed, while a credit card charge is generally considered paid when the charge is made.
Payments may be made using a crowdfunding platform like GoFundMe if the beneficiary is a qualified organization. Community property rules may also affect whether a contribution is complete for tax purposes, so ownership and state-law consent issues should be reviewed before year-end.
Calculating the Charitable Contribution Deduction: Types of Property
Calculating the charitable contribution deduction largely depends on the type of property given away. With some exceptions explained below, the general rule is that contributions are valued at the fair market value of the property on the date of the contribution. Cash is the simplest case because the deduction usually equals the amount of cash given.
For long-term capital gain property, such as appreciated stock or qualifying real estate, the deductible amount is generally fair market value subject to percentage limitations and other special rules. For long-term capital loss property, the deduction rules are different and generally limited by basis and fair market value, so the property should be analyzed separately, rather than grouped with appreciated property.
Tangible Long-term Capital Gain Property
The amount of the charitable contribution deduction for tangible long-term capital gain personal property depends on how the charitable organization uses the contributed property. If the organization directly uses the property to further its charitable purpose or function, the amount of the deduction is the appreciated fair market value of the property. However, if the use of the property is unrelated to the organization’s charitable purpose or function, the amount of the deduction is limited to the donor's basis in the property.
Self-created works, such as art, music, and books, are generally ordinary income property in the donor's hands, which means the deduction is usually limited to basis rather than fair market value. A donor who created the item generally cannot deduct the value of the donor's labor or talent.
What Are the Limits on the Charitable Contribution Deduction?
The percentage limit on deductions depends on both the type of property contributed and the type of recipient organization. For many cash gifts to public charities, the general limit is 60% of adjusted gross income, but other categories are subject to 30%, 20%, or other limits depending on the facts.
Contributions to private foundations are often subject to lower limits than contributions to public charities. Taxpayers should not use a single blanket percentage for all gifts, because the ordering rules and limitation categories can materially change the result.
Amounts disallowed because of the AGI limitation can generally be carried forward for up to five years. Any unused carryover not absorbed during the carryforward period is lost, and carryover planning should be reviewed carefully on a final return.
Please note that these rules are very complex and nuanced. The most frequently encountered limitations are discussed below, but tax preparers should consult IRS Publication 526 (Charitable Contributions) for a more detailed discussion.
Donations to Public Charities and Private Foundations
Contributions to public charities are generally more favorable than those made to private foundations. Public charities are the most prevalent organizations and include churches, hospitals, and certain qualified medical research organizations. Other types include the following:
- Have an active program of fundraising and receive contributions from sources such as the general public, government agencies, corporations, private foundations, or other public charities,
- Receive income from the conduct of activities in furtherance of the organization’s exempt purposes, or
- Actively function in a supporting relationship to one or more existing charities.
Examples include the American Red Cross, the United Way, Save the Children, and Americares.
In contrast, private foundations typically have a major source of private funding from one family or corporation (e.g., the Bill and Melinda Gates Foundation). Private foundations generally bestow grants to other charitable organizations and individuals, rather than the direct operation of charitable programs. They are further classified as operating and nonoperating depending on the amount of assets spent each year on charity and such classification can change each year. Therefore, taxpayers must consult with the private foundation to determine its classification for the year.
Limitations on claiming the charitable contribution deduction based on the type of donation
Contributions of cash and unreimbursed out-of-pocket expenses to public charities, government organizations, and private operating foundations are limited to 50% of the taxpayer’s AGI. However, this limitation has been increased to 60% of AGI through 2025 for cash contributions. While contributions of cash and unreimbursed out-of-pocket expenses to certain private nonoperating foundations may qualify for the 50% limitation, the general rule is such contributions are limited to 30% of AGI.
Intangible property contribution limits
Contributions of appreciated capital gain property classified as intangible personal property or real property to public charities, government organizations, and operating foundations are limited to 30% of AGI. However, the 30% limit can be increased to 50% if the taxpayer elects to reduce the value of the contribution by the amount of the capital gain. This election can be very valuable when the taxpayer makes contributions subject to the limitations and the amount of the appreciation is small.
Tangible property contribution limits
Limits on contributions of appreciated capital gain property are classified as tangible personal property depending on how the charitable organization uses the property. For contributions of such property to public charities, government organizations, and operating foundations, the limit is 30% of AGI if the organization directly uses the property in furthering its charitable purpose or function. If the property is not put to such use, the limit is 50% of AGI. Generally, all contributions of all appreciated capital gain property to nonoperating foundations are limited to 20% of AGI.
Ordinary income property contribution limits
Contributions of ordinary income property to public charities, government organizations, and operating foundations are limited to 50% of AGI. Such contributions to nonoperating foundations are generally limited to 30% of AGI. How to claim the charitable contribution deduction based on contribution type
Monetary contributions
Taxpayers must have a record or a timely written communication for all monetary charitable contributions before deducting them on the 1040 Schedule A. Monetary contributions include:
- Cash
- Check
- A transfer of a gift card redeemable for cash
- Credit card payment
- Electronic funds transfer
- Online payment service,
- Payroll deduction
Canceled checks, receipts, or other reliable written records that show the name of the charitable organization, the date of the contribution, and the amount of the contribution should be maintained as records. A timely written communication is a receipt, letter, or email the taxpayer receives from the charitable organization.
To be valid, all required documentation must be obtained before the earlier of the date the taxpayer files their original tax return for the year the contribution was made or the due date, including extensions, for filing the original tax return for that year. Failure to adhere to these rules may result in disallowance of the charitable contribution deduction.
To substantiate monetary contributions made by payroll deduction, the taxpayer can use a pledge card prepared by or at the direction of the charitable organization, along with one of the following documents:
- A pay stub
- Form W-2 (Wage and Tax Statement)
- Other employer-furnished document that shows the amount withheld and paid to the charitable organization
If the donor makes a single monetary contribution of $250 or more by payroll deduction, the pledge card or other document from the charitable organization must also include a statement that the organization did not provide goods or services in exchange for the contribution (if that was the case). Each payroll deduction of $250 or more is treated as a separate contribution for purposes of this requirement.
All required documents must be obtained before the earlier of the date the taxpayer files their original tax return for the year the contribution was made or the due date, including extensions, for filing the original tax return for that year. Failure to adhere to these rules may result in disallowance of the deduction.
Quid pro quo contributions
For quid pro quo contributions (payments consisting of both a donation and a purchase of goods and/or services) of $75 or more, the charitable organization is required to provide a written disclosure statement to the taxpayer. The written disclosure acts as a record of the value of the goods and/or services obtained by the taxpayer and must:
- Inform the taxpayer that the amount of the deductible contribution is limited to the excess of the money (and the fair market value of other property) contributed by the taxpayer over the value of goods and services provided by the organization.
- Provide the donor with a good faith estimate of the fair market value of the goods and services.
For any single monetary and nonmonetary contribution of $250 or more (including unreimbursed out-of-pocket expenses), the taxpayer must obtain a contemporaneous written acknowledgement from the charitable organization that includes the following:
- The name of the charitable organization
- The amount of any monetary contribution and/or a description (but not the fair market value) of any contribution or property
- A statement that no goods or services were provided by the organization in return for the contribution (if that was the case)
- If the organization did provide goods or services in return for the contribution, a description and good faith estimate of the fair market of the goods or services.
- If the organization only provided intangible religious benefits in return for the contribution, a statement stating such.
A separate contemporaneous written acknowledgement may be provided for each single contribution valued at $250 or more, or one acknowledgement (e.g., an annual statement) may be used for a record of multiple single contributions valued at $250 or more. Separate contributions of less than $250 should not be aggregated in the total, even if total annual contributions by the taxpayer to the organization exceed $250.
To be contemporaneous, the written acknowledgement must be obtained before the earlier of the date the taxpayer files their original tax return for the year the contribution was made or the due date, including extensions, for filing the original tax return for that year. Canceled checks, alone, are not adequate for these contributions. Failure to adhere to these rules may result in disallowance of the charitable contribution deduction. Contemporaneous written acknowledgements are not filed with the return.
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Claiming the Deduction for Non-Cash Charitable Contributions
For non-cash charitable contributions over $500, no deduction is allowed unless the taxpayer completes Form 8283 (Noncash Charitable Contributions). If the taxpayer is contributing a single item of clothing or any household item worth more than $500, an appraisal (see below) is required unless the property is in good condition or better. If the property is not in good condition or better, the taxpayer can still claim the deduction if an appraisal is obtained.
Except for donations of publicly traded securities, all donations of property valued over $5,000 require a qualified appraisal that must be filed with the return. The appraisal must be performed by a qualified appraiser who is not the taxpayer, charitable organization, any person from whom the property was acquired, or certain related individuals or entities. Such appraisals, in addition to other requirements, must be made no earlier than 60 days prior to the day of the contribution and no later than the due date of the tax return on which the contribution is first claimed.
Automobiles
For donations of automobiles worth more than $500, the taxpayer must include an acknowledgement from the charitable organization with the return. With some exceptions, the amount of the deduction is equal to the lesser of the automobile’s fair market value on the date of the contribution or the gross proceeds received by the charitable organization from selling the automobile. The gross proceeds limitation does not apply if the organization improves the automobile, uses the automobile, or gives/sells the automobile to someone below fair market value in furtherance of the organization’s purpose of helping the poor.
Art
For donations of art valued at more than $50,000, the taxpayer may request a “Statement of Value” (SOV) from the IRS. Obtaining an SOV is basically an advanced ruling that the IRS will accept the appraised value of the art for valuing the charitable contribution or will require the value to be adjusted. The request for a SOV must include a copy of the appraisal, the completed appraisal summary, and the user fee ($7,500 for the first three pieces of art, and $400 for each additional piece of art).
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- Capital Gains and Losses
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