Can You Write Off Gifts on Your Taxes?

Many individuals wonder if gifts offer tax benefits. While personal gifts are generally not deductible for income tax purposes, specific circumstances allow for tax advantages. Charitable contributions represent the primary avenue through which gifts can provide a tax deduction. Understanding these distinctions, along with the separate concept of gift tax, is important for navigating the tax implications of giving.

Deducting Charitable Contributions

Gifts made to qualifying charitable organizations can be tax-deductible. These organizations typically hold a 501(c)(3) status from the Internal Revenue Service, indicating they are organized for charitable, religious, educational, scientific, or literary purposes. Donations to such entities, including churches, schools, and hospitals, are generally eligible for deduction if you itemize.

Contributions can be made in various forms, including cash and non-cash property like appreciated securities or real estate. Cash contributions are generally deductible up to a certain percentage of your adjusted gross income (AGI), typically 60% for public charities. Non-cash contributions, such as stocks held for more than one year, typically have a lower AGI limit, often 30%, though the fair market value can be deducted. The value of volunteer services is not deductible, but out-of-pocket expenses directly related to volunteering, such as mileage or supplies, may be.

Determining the value of non-cash contributions requires adherence to specific rules. For items like used clothing or household goods, the fair market value is generally what a willing buyer would pay for the item’s condition. For larger non-cash donations, especially those exceeding $5,000, a qualified appraisal may be necessary to substantiate the value. This appraisal must be obtained before the tax return is filed and is not submitted directly to the IRS, but kept with your records.

If your charitable contributions exceed these annual AGI limits, the excess amount is not lost. You can carry over these excess contributions for up to five subsequent tax years. In each carryover year, the deduction remains subject to the same percentage limitations applicable in that year. Current year contributions are deducted first, followed by any carryover amounts from previous years.

Proper recordkeeping is fundamental for claiming charitable deductions. For cash contributions, bank records, credit card statements, or written communications from the charity showing the organization’s name, date, and amount are required. For any contribution of $250 or more, whether cash or non-cash, a contemporaneous written acknowledgment from the qualified organization is necessary. This acknowledgment must state the amount of cash, describe any non-cash property, and specify if any goods or services were provided in return for the donation. For non-cash donations exceeding $500, IRS Form 8283, Noncash Charitable Contributions, must be completed and attached to your tax return.

Understanding Gift Tax for Givers

Gift tax is a federal tax imposed on the transfer of property from one individual to another without receiving full value in return. This tax is typically the responsibility of the giver, or donor, not the recipient. It applies to money, real estate, vehicles, or any other valuable property transferred as a gift. Critically, gift tax is separate from income tax deductions and does not provide a “write-off” for the giver’s income.

Each year, there is an annual gift tax exclusion, which is the amount you can give to any individual without incurring gift tax or needing to report the gift to the IRS. For 2024, this annual exclusion is $18,000 per recipient, increasing to $19,000 for 2025. You can give this amount to as many individuals as you wish each year without it counting against your lifetime exemption or requiring a gift tax return.

Married couples have the option of “gift splitting,” allowing them to combine their individual annual exclusions. This means a married couple can give up to double the individual annual exclusion amount to a single recipient—$36,000 in 2024 or $38,000 in 2025—without incurring gift tax. To elect gift splitting, both spouses must consent and typically need to file IRS Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.

Beyond the annual exclusion, a lifetime gift tax exemption allows individuals to transfer a cumulative amount of gifts (and estate transfers) tax-free over their lifetime. For 2024, this unified credit is $13.61 million per individual, rising to $13.99 million for 2025. Gifts exceeding the annual exclusion amount in a given year reduce this lifetime exemption, even if no gift tax is immediately owed.

Certain types of transfers are not considered taxable gifts, regardless of their amount, and do not count against the annual exclusion or lifetime exemption. These include payments made directly to an educational institution for tuition, or directly to a medical provider for medical expenses. Gifts to a spouse who is a U.S. citizen are also generally exempt from gift tax. Additionally, gifts made to political organizations for their use are not subject to gift tax.

If gifts to an individual exceed the annual exclusion amount, the donor must typically file IRS Form 709. This form is used to report the gift and track the amount that reduces the lifetime exemption. Filing Form 709 does not automatically mean gift tax is owed, but it is necessary to record transfers that exceed the annual exclusion. The deadline for filing Form 709 is generally April 15th of the year following the gift.

Non-Deductible Gifts

While some gifts offer tax advantages, many types of gifts cannot be “written off” for income tax purposes by the giver. Gifts made to individuals, such as family members or friends, for personal reasons are generally not income tax deductible. This includes gifts for birthdays, holidays, or financial assistance, regardless of the amount. The tax law views these as personal transfers, not expenses that reduce taxable income.

Similarly, gifts to organizations that do not hold a recognized tax-exempt status, such as a 501(c)(3) designation from the IRS, are not deductible. This means donations to political campaigns, social clubs, or most foreign organizations typically do not qualify for a charitable deduction. To ensure deductibility, it is important to verify an organization’s qualified status before making a contribution.

When a gift provides a personal benefit to the giver, the deductible amount may be reduced. If you receive goods or services in exchange for a donation, such as attending a charity banquet or purchasing an item at an auction, only the amount exceeding the fair market value of the benefit received is deductible. The charity should provide a good faith estimate of the value of any goods or services provided.