What the New Tax Law Means for Charitable Donations

A tax-deductible charitable donation is a gift of money or property made to a qualified organization that can be subtracted from your taxable income. A qualified organization is most commonly a group with 501(c)(3) status as determined by the Internal Revenue Service (IRS), which includes public charities, religious organizations, and nonprofit educational institutions. You can verify an organization’s status using the IRS’s Tax-Exempt Organization Search tool.

The legal framework for these deductions has undergone adjustments, affecting how much you can deduct and the strategies available to maximize the tax advantages of giving. Understanding the current rules is important for anyone looking to support causes they care about while managing their tax obligations.

The Standard Deduction’s Effect on Charitable Giving

When filing federal income taxes, taxpayers choose between taking the standard deduction or itemizing their deductions. The standard deduction is a fixed dollar amount subtracted from your income. For the 2025 tax year, it is $15,150 for single filers, $30,300 for married couples filing jointly, and $22,750 for heads of household. You only receive a tax benefit from charitable gifts if you itemize, which requires your total deductible expenses to exceed your standard deduction amount.

Recent tax law changes increased the standard deduction amounts, so many taxpayers who previously itemized now find it more advantageous to take the higher standard deduction. For these households, charitable contributions may no longer provide a direct tax benefit. This occurs when their total itemized deductions—including state and local taxes (capped at $10,000), mortgage interest, and medical expenses—do not exceed their standard deduction.

To overcome this, some donors use a strategy called “bunching” their contributions, which involves consolidating several years’ worth of planned donations into a single tax year. This allows a taxpayer to push their total itemized deductions over the standard deduction threshold for that one year. They can then claim the charitable deduction and take the standard deduction in the following years.

For example, consider a married couple that normally donates $10,000 to charity each year and has another $20,000 in other itemized deductions. Their total of $30,000 is below the $30,300 standard deduction for 2025, so they would not itemize. If they instead “bunch” two years of donations, contributing $20,000 in 2025, their itemized deductions for that year would total $40,000. They could then itemize in 2025 and take the standard deduction in 2026, resulting in a greater total deduction over the two-year period.

Contribution Limits Based on Income

For taxpayers who itemize, the amount of charitable contributions they can deduct is limited based on their Adjusted Gross Income (AGI). AGI is calculated from your gross income minus specific “above-the-line” deductions. The deductible percentage of AGI depends on the type of donation and the charity.

The limit for cash contributions to public charities is 60% of a donor’s AGI. This limit is scheduled to revert to 50% after 2025. For donations of non-cash assets held for more than one year, such as appreciated stocks or real estate, the deduction is limited to 30% of the donor’s AGI.

If a donor contributes more than the AGI limits in a given year, the tax law allows the excess deduction to be carried forward. This carryover can be used for up to five subsequent years, though the AGI limits will still apply in each of those future years. This provision ensures donors are not penalized for making large gifts that exceed the annual thresholds.

Rules for Non-Cash Donations

Donating property other than cash, known as non-cash donations, involves a distinct set of rules for valuation and deduction. These contributions can range from financial assets to household goods, and the tax benefits vary depending on the property type.

Donating long-term appreciated assets, such as stocks or mutual funds held for more than one year, is a common strategy. When you donate these assets directly to a charity, you can deduct the full fair market value at the time of the gift. You also avoid paying the capital gains tax you would have owed if you had sold the assets first and then donated the cash.

The tax code distinguishes between ordinary income property and capital gain property. For ordinary income property, the deduction is limited to the lesser of its fair market value or your cost basis. For capital gain property, like the appreciated securities mentioned previously, you can deduct the full fair market value.

For used goods like clothing and household items, the deduction is based on the item’s fair market value, and the items must be in “good used condition or better” to be deductible. Special rules apply to donations of vehicles, boats, and airplanes. For these items, the deduction is limited to the gross proceeds the charity receives when it sells the item.

Required Documentation and Substantiation

To claim a deduction for a charitable contribution, you must maintain proper records. The documentation required by the IRS depends on the amount and type of the gift, and failure to meet these requirements can result in the disallowance of your deduction. The specific requirements are tiered based on the donation’s value:

• For any single donation under $250, you must have a record like a canceled check, bank statement, or a receipt from the charity.
• For any single contribution of $250 or more, you must obtain a “contemporaneous written acknowledgment” from the organization before filing your taxes. This document must state the donation amount or describe the property and note if any goods or services were received in exchange.
• If your total deduction for all non-cash contributions exceeds $500, you must file IRS Form 8283 with your tax return.
• For non-cash donations valued at more than $5,000, you must also obtain a “qualified appraisal” from a qualified appraiser and complete the relevant sections of Form 8283.

Alternative Giving Strategies

Beyond direct donations, several alternative strategies can provide tax benefits, particularly for individuals who do not benefit from itemizing. These methods offer different ways to structure charitable gifts to align with financial and philanthropic goals and can be useful for facilitating the “bunching” strategy.

A Qualified Charitable Distribution (QCD) is available for individuals age 70½ and older. A QCD allows a person to donate up to $113,000 in 2025 directly from their Individual Retirement Account (IRA) to a qualified charity. The amount of the QCD is excluded from the taxpayer’s gross income, providing a tax benefit regardless of whether the taxpayer itemizes. This distribution can also satisfy all or part of their annual Required Minimum Distribution (RMD).

A Donor-Advised Fund (DAF) is another option. A DAF is a charitable giving account where a donor makes a contribution, receives an immediate tax deduction, and then recommends grants from the fund to charities over time. DAFs are a useful tool for the “bunching” strategy, as a donor can make a large contribution in one year to exceed the standard deduction. The funds in the DAF can then be used to support charities over several years.