Why Isn't This Donation Deductible?
After a week of excessive eating, shopping, and whatever else, the conventional wisdom is that donors are looking for an opportunity to give back, perhaps to balance the scale of indulgence.
While there are certainly those who donate out of the goodness of their hearts with no expectation of receiving anything in return, many expect to at least take the donation as a deduction on their tax returns.
You Can’t Deduct What You Don’t Itemize
Anecdotally, the 2021 changes to the Internal Revenue Code (IRC) impacted the giving patterns of small donors in particular by requiring taxpayers to choose between itemizing charitable contributions or taking the standard deduction. While there was a temporary “above the line” deduction of $300-$600 allowed in 2021, that has since expired and for 2024 and 2025, in order to deduct charitable contributions, taxpayers must itemize.
For many people the standardized deduction makes more sense and therefore enticing them with a potential deduction doesn’t carry the same weight it may have in prior years.
As a result, a lot of organizations that count on small donations from multiple donors are feeling the hit. Here are the standardized deduction amounts for 2024 and 2025:
If you (or your donors) either don’t care about the deduction, or donate an amount greater than the standard deduction, there is still more to know about deductibility.
While this is not an exhaustive list, let’s go over some of the basics of deductible donations, and for you over achievers out there, here’s the IRS Publication 526 covering charitable deductions that gets into the weeds with some of the quirkier situations like contribution of taxidermy property or donating a fractional interest in property.
Who Can I Donate To?
First, in order to solicit donations that can be deducted, you must be a qualified organization. This includes:
houses of worship including: churches, mosques, temples, synagogues
most nonprofit charitable organizations
most nonprofit educational organizations like schools or museums
most nonprofit hospitals
volunteer fire companies
The best way to determine if your organization (or an organization you would like to donate to) is considered a qualified organization, is to search here.
Who Can’t I Donate To?
Organizations That Are Not “Qualified Organizations”
I mean, you can still donate but you know what isn’t deductible? Political contributions. So although the deluge of text and email messages we all received earlier this year were asking us to donate, that does not mean a donation to a political candidate or a political group results in a tax deduction.
Similarly, donations to chambers of commerce or country clubs are not charitable deductions. Chamber of Commerce dues may be business expenses, but that is a different category and the IRS has specifically held that country club dues are NOT deductible expenses.
Same for individuals. You can certainly make a gift to someone in need, but unless your donation is to a qualified organization, it is not a deductible gift. This includes circuitous donations to an organization with the understanding that your specific donation will be filtered to a specific individual in need. So while you can deduct donations to an organization providing hurricane relief to families, you may not direct (or accept direction from a donor) as to a specific family or individual that their donation should go to.
When You Receive a Benefit
In addition to all the other information that a good donation receipt should include, there is, or should be, a version of the following sentence: “no goods or services were provided in exchange for this donation.”
Some of these goods and services are obvious, like the fact that tuition paid to a nonprofit college or university your child attends is not deductible. But what about a fundraising gala for your child’s school where you buy tickets and perhaps some art at the silent auction? In that case, some of the cost may be deductible, but you can’t deduct the value of the amount that you receive a benefit from.
In the fundraising gala example, the per person cost of the dinner is $50 but tickets are $75. The deductible amount reflected on the receipt is $25, not the entire $75.
Similarly, if a patron purchases a piece of art at your silent auction for $500 and the value of the item is $250, the deductible amount is $250. If the patron pays $200 for a $250 piece of art, there is no deduction to the donor, despite the fact that the art was donated (the artist gets a receipt for that) and that the organization received $200.
But Wait…There Are Exceptions!
This rule regarding receiving goods or services does not include insubstantial goods or services, known as token or de minimis gifts from the organization to the donor or if the gift is small in comparison to the amount of the donation. The exact dollar amount of what constitutes a token gift changes from year to year as does the value of an item that is low cost in comparison to the donation.
According to the IRS's latest inflation adjustments, in order to qualify as insubstantial goods or services, the items or services must cost your organization no more than $13.20 to produce for 2024, or $13.60 for 2025; they must bear your organization's name or logo; and the contribution received must have been at least $62.50 in 2023 or $66 in 2024. Things like tote bags, coffee cups, or stickers are examples of this sort of name and/or logo items.
Regarding the exception for low-cost items in relation to the donation (insubstantial return benefit), the applicable amount for 2024 and 2025 is either items having a fair market value of $132 or less or be worth 2% or less of the donor's payment, whichever is less.
Value of Your Time or Service
Giving blood, volunteering at a food pantry, serving on the board of a nonprofit. These are all commendable, but not deductible.
How Much Can I Deduct?
There basic rule regarding limits on deductions is this:. you cannot deduct more than your adjusted gross income (AGI). While the amount of a contribution that you can deduct is limited to a percentage of your AGI, that percentage depends on both the type of property you give and which category of qualified organization you give it to.
As of tax year 2024, deductions for cash contributions are limited to 60% of your AGI minus your deductions for all other contributions. You can find your AGI on Line 11 of Form 1040.
Cash Contributions Over $250
Cash contributions include credit cards, Venmo, Zelle, checks, electronic transfers, payroll deductions etc. and are limited to 60% of your AGI.
Deductions may be further limited to 50%, 30%, or 20% of your AGI, depending on the type of property you give and the type of organization you give it to. Here’s the IRS contribution worksheet to give you a gauge of what is involved in determining contribution limits.
A cash contribution can only be deducted if the donor keeps one of the following:
bank record that shows the name of the qualified organization, the date of the contribution, and the amount of the contribution,
A receipt (or a letter or other written communication such as an email) from the qualified organization showing the name of the organization, the date of the contribution, and the amount of the contribution, or
a payroll deduction record kept in accordance with IRS rules.
Clothing and Household Items
You can't take a deduction for clothing or household items you donate unless the clothing or household items are in good used condition or better.
Exception.
You can take a deduction for a contribution of an item of clothing or a household item that isn't in good used condition or better if you deduct more than $500 for it, and include a qualified appraisal prepared by a qualified appraiser and a completed Form 8283, Section B.
Household items.
Household items include:
Furniture and furnishings,
Electronics,
Appliances,
Linens, and
Other similar items.
Household items don't include:
Food;
Paintings, antiques, and other objects of art;
Jewelry and gems; and
Collections.
The amount you may deduct is the fair market value (FMV) of the items, and you guessed it, there are rules for determining what that is as well.
Cars, Boats, and Airplanes
The following rules apply to any donation of a qualified vehicle.
A qualified vehicle is:
A car or any motor vehicle manufactured mainly for use on public streets, roads, and highways;
A boat; or
An airplane.
Deduction more than $500.
If you donate a qualified vehicle with a claimed FMV of more than $500, you can deduct the smaller of:
The gross proceeds from the sale of the vehicle by the organization, or
The vehicle's FMV on the date of the contribution. If the vehicle's FMV was more than your cost or other basis, you may have to reduce the FMV to determine the deductible amount.
There are exceptions here as well. One is the situation in which the organization you donate the vehicle utilizes it and/or makes significant improvements to it. The second is when you donate it to an organization that turns around and sells it or gives it to someone in need. In both cases, the general rule is that you can deduct the FMV of the vehicle even if it was sold for more or less than your cost.
Patents and Other Intellectual Property
If you donate intellectual property to a qualified organization, your deduction is limited to the basis of the property or the FMV of the property, whichever is smaller. Intellectual property means any of the following.
Patents.
Copyrights (other than a copyright described in Internal Revenue Code sections 1221(a)(3) or 1231(b)(1)(C)).
Trademarks.
Trade names.
Trade secrets.
Know-how.
Software (other than software described in Internal Revenue Code section 197(e)(3)(A)(i)).
Other similar property or applications or registrations of such property.
Additional deduction based on income.
You may be able to claim additional charitable contribution deductions in the year of the contribution and years following, based on the income, if any, from the donated property.
After the legal life of the intellectual property ends, or after the 10th anniversary of the donation, whichever is earlier, no additional deduction is allowed.
The additional deductions can't be taken for intellectual property donated to certain private foundations.
Reporting requirements.
You must inform the organization at the time of the donation that you intend to treat the donation as a contribution.
The organization is required to file an information return showing the income from the property, with a copy to you.
Not A Complete List, Not Your Lawyer!
This is meant to be an overview of some of the issues and rules around the charitable deduction. There’s a lot here, and each situation has its own fact patter. If you have questions, definitely reach out to your accountant or your attorney to get some clarification. It’s also a good time to remind you that this is not intended to be legal advice, although I am a lawyer, I’m not your lawyer!
