You can deduct qualifying charitable donations from your taxable income. Depending on the type of donation, you may be limited to 20%, 30%, 50%, or 60% of your taxable income. Although the charitable donation benefits were increased in 2020 and 2021, they have returned to their pre-pandemic rules.
Since charitable donations may decrease your tax bill, this means donating to charity can lower the amount of taxes you owe when filing your return.
You’ll need to make sure the organization you donate to qualifies as a charitable organization. Most nonprofits that are tax-exempt, like the Red Cross, nonprofit educational organizations, volunteer fire companies, and religious organizations qualify. You can find a full list of qualifying organizations on the IRS website.
Regardless of the amount, it’s important to keep records of your charitable donations. You’ll often need to provide the name of the charity, date of donation, and amount. Credit card or bank statements and receipts from the charity can often provide these details. You can also deduct expenses you incurred when volunteering at a charity, such as mileage.
If you donate over $250 in cash, you’ll need a letter of acknowledgement from the charity. And, if you donate more than $500 in a form other than cash, you’ll need to fill out IRS form 8283.
When filing your taxes, you’ll need to decide if it makes more financial sense to itemize your charitable contributions or take the standard deduction. If you can deduct more from your income with the standard deduction, then it may not be worthwhile to report these contributions.