5 Tips for Smart and Tax-Effective Charitable Giving This Holiday Season and Beyond

As people plan their gifts to family, friends, colleagues, and clients, many also give to charities. Whether you plan to donate money, property, goods, or services, here are five tips to consider for donations during this holiday season.

1. Make sure you’re contributing to a qualified charity.

If you plan to itemize your charitable donations on your tax return, make sure your donation goes to a qualified exempt organization. Not sure if the organization you are considering is a qualified organization? You can confirm the organization’s status by going to IRS.gov and using the Exempt Organizations Select Check tool.

If you are a taxpayer 70.5 years or older, you have two additional giving strategies.

If you make one of these donations, the amount donated is not included in your taxable income. However, that also means you can’t itemize this deduction on your tax return.

2. Keep appropriate records of all charitable donations you plan to deduct.

You’ll need to track any donations you plan to deduct, regardless of the amount. Records can be in the form of a canceled check, bank or credit card statement, or payroll deduction record. Payroll deductions can be substantiated with the donation listed on a pay stub, a Form W-2, or other documentation furnished by the employer.

For contributions of $250 or more, you must receive a written acknowledgement from the charity which states:

• Charity’s name
• Date of the contribution
• Amount of the contribution
• Whether any goods or services were received in exchange for the donation

It’s important to have the written acknowledgment from the charity before filing your tax return.

3. Only donate used items that are in good condition and accepted by the organization.

To be tax-deductible, any used clothing or household goods donated should be in good condition or better. Household goods include furniture, furnishings, electronics, appliances, and linens. Always check with the charity before you donate to ensure you know what they accept, as policies may have changed.

It’s a good idea to take pictures of donated items for documentation. Certain non-cash donations of $5,000 or more will require an official appraisal.

4. Keep all charitable contributions to the current year.

Charitable contributions are only deductible in the year they were made. So, if you charged a contribution to a credit card on or before December 31, it counts—even if you’re paying your credit card bill in the next year.

5. Special rules have expired – make sure you understand what that means for you.

Taxpayers must choose between itemizing deductions or taking the standard deduction. Taxpayers must also itemize to receive a tax deduction for charitable contributions as special rules have expired.

For 2023, the standard deductions are:

• Single Taxpayers and Married Individuals Filing Separately: $13,850
• Married Couples: $27,700
• Head of Household: $20,800

In addition, for 2023, the limit on charitable cash contributions is 60% of adjusted gross income (AGI).

Charitable Giving at Year-End and Beyond

The joy of giving extends beyond the holiday season, and with a thoughtful approach, your contributions can have a lasting impact.

As you consider charitable giving options, remember to choose qualified charities, keep meticulous records of your donations, ensure your donated goods are in good condition, stay within the current tax year for deductions, and be aware of the updated standard deduction and contribution limits. And consult a tax advisor to ensure you’re maximizing the benefits of your charitable contributions.

If you have questions about how you can embrace the spirit of giving in a tax-efficient manner, we can help navigate the complexities of charitable contributions at year-end and beyond.