How Much Do Charitable Donations Reduce Taxes?
Charitable donations provide an excellent way for businesses and individuals to support their communities. Whether you make a monetary gift to a nonprofit entity or donate useful items to a religious organization, you’re helping improve the lives of others in need.
You can also benefit financially by making tax-deductible donations to a qualified organization that meets the eligibility requirements for a tax-exempt entity.
Let’s look at how donating helps with taxes and how you can benefit from the maximum tax reductions.
How Do Donations Affect Taxes?
When you make charitable donations, you can take this amount out of your taxable income, which means you won’t pay income tax on your donations. There are limits and conditions to this, with only a certain amount allowed to be deducted each year. These donations can be in the form of either cash or noncash assets.
To ensure the donations you make are tax-deductible, you also need to confirm you’re donating to a qualifying organization.
Which Donations Are Tax-Deductible?
Only donations made to organizations that qualify under section 170(c) of the Internal Revenue Code are tax-deductible. The types of organizations that qualify and to which you can make tax-deductible donations include:
- U.S.-qualified charitable organizations.
- Federal, state and local governmental units (when donations are for public purposes).
- Religious organizations.
- Veterans’ organizations.
- Domestic fraternal societies (if funds are used exclusively for charitable purposes).
Remember that many of these organizations, except for churches and government entities, must apply for tax exemption and meet all the criteria before you can make tax-deductible donations to them. Non-tax-deductible donations include contributions to individuals, political organizations and nonexempt organizations.
Be sure to document your charitable contributions by keeping records related to the transactions, such as receipts, bank statements and canceled checks.
If you volunteer at a nonprofit, you can deduct any expenses directly related to your activities, though you cannot deduct the value of your time.
How to Deduct Your Donations on Your Tax Return
You can claim your deduction for making charitable donations when you file your annual tax returns. You’ll need to itemize your tax deductions by filling out Schedule A and sending it with your return.
Previously, you couldn’t access the tax benefits of donating to a nonprofit if you took the standard deduction, unless the IRS made an exception for that specific tax year. However, thanks to the One, Big, Beautiful Bill, this will change as of 2026. From then, you can deduct up to $1,000 of cash donations without itemizing, and married couples can deduct up to $2,000.
While giving money is the most common method of donating to a charitable organization, you can also deduct the value of items you contribute, such as furniture, food, automobiles, computer equipment or office supplies.
How Much Can You Deduct in Charitable Donations?
You may not be able to deduct the full amount of your charitable deductions on your tax returns. In general, the amount cannot exceed 60% of your adjusted gross income (AGI), although the threshold could be lower depending on the donation and organization type. This limit drops to 30% when donating appreciated property or stocks.
While most people won’t approach this threshold, those who do may wish to consider how they donate to their chosen organizations.
The Most Tax-Efficient Ways to Donate
While the purpose of donating should be to support organizations that help others, that doesn’t mean you shouldn’t get the maximum tax benefits from your generosity. Here are some ways you can do this:
Donating Appreciated Assets Rather Than Cash
When you donate noncash assets that you’ve held for more than a year, you can eliminate the capital gains tax you would have paid on them if you’d sold them. You can also deduct these assets for your taxes at fair market value.
Assets that you could donate include real estate, valuables and appreciated stock.
Through Your IRA
Individuals aged over 70 ½ years in 2025 can make a qualified charitable distribution of up to $108,000 from their IRA to their chosen organization. While this distribution isn’t tax-deductible, it won’t count as taxable income.
Alternatively, you can also name your chosen organization as a beneficiary of your IRA.
When Rebalancing Your Portfolio
When investors rebalance their portfolios, this often results in capital gains that they must pay tax on. Instead of paying capital gains tax, you can donate securities that you’ve held for over a year.
Taking a Long-Term Approach
Charitable contribution deductions can be carried forward for five years, although you must claim the maximum possible deduction each year. This is particularly useful for any year where you’ve earned a high income or acquired a large amount of money, such as through an inheritance.
How to Calculate the Tax Benefits of Donating to a Nonprofit
So, how much do you get back with tax-deductible donations? You can determine your savings from making charitable donations with this straightforward calculation. Multiply your marginal tax rate by the value of your contributions.
For example, if your rate is 32% and you contributed $10,000 in cash, goods or both, you’ll end up saving $3,200 at tax time.
If you’re in the Atlanta area and need help weighing the tax benefits of donating to charity, turn to the Marshall Jones Certified Public Accountants and Advisors. Marshall Jones is an experienced, reputable public accounting firm that can provide reliable tax preparation, guidance and numerous additional financial services to businesses and individuals.
