Charitable Deductions: How to Save on Your Taxes by Giving Back in 2022

by
Soo Lee, CPA
Updated 
March 11, 2022
February 16, 2022
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Most people know that donating to charity can help them save on their income taxes. But the actual rules for charitable deductions can get a little complicated.

Here's what you need to know about saving money by giving back.

Contents

How do you claim a charitable tax deduction?

Normally, charitable contributions are a personal itemized deduction. Like medical expenses, mortgage interest, and property taxes, these are personal expenses you can deduct if you skip the standard deduction.

For 2021, though, the IRS has allowed for a special tax deduction for donations on top of the standard deduction.

Let's talk about how this works first. Then we’ll get into how things normally go.

Charitable donations in 2021: More savings for non-itemizers

For the 2021 tax year, taxpayers can write off some of their cash donations even if they take the standard deduction.

The amount you can deduct depends on your filing status. Here’s how it breaks down.

Filing Status Write-Off Amount
Single $300
Married, filing separately $300
Head of Household $300
Married, filing jointly $600

This deduction was first offered last year as part of the CARES Act. Thankfully, it was extended into 2021.

Claiming charitable donations as an itemized deduction

These days, nearly 90% of taxpayers take the standard deduction. This year’s special deduction for donations gives all those Americans an extra tax break for their charitable giving.

Normally, though, you can only deduct your charitable gifts if you choose to itemize and don't take the standard deduction. Here's are the current amounts:

Filing Status Standard deduction amount (2021)
Single $12,550
Married, filing separately $12,500
Head of Household $18,800
Married, filing jointly $25,100

In order to get any benefit from itemizing as a single filer, for example, your personal expenses would have to be greater than $12,550.

As you can imagine, most taxpayers don't spend enough on charitable giving and other itemized expenses to exceed their standard deduction amount.

If you do choose to itemize, you'll fill out your donations in lines 11-14 of Schedule A — the part of the form that deals with “Gifts to Charity”.

Lines 11-14 of Form Schedule A, where taxpayers enter their gifts to charity

Note that, if you make gifts "other than by cash or check," you’ll have to estimate the dollar value of what you're donating. We’ll explain how to do that in a bit!

Side note: If you have any expenses from working a freelance or independent contracting job, you can always write those off on top of the standard deduction! Don't get these business write-offs confused with personal deductions like donations.

How much can you deduct for donations?

Normally, you can deduct up to 60% of your adjusted gross income (AGI) for gifts to charity. In 2020 and 2021, though, this limit has been raised to 100%.

That's right — you can theoretically eliminate all of your taxable income through charitable giving. This 100% limit doesn't apply automatically, though. You'll have to make an election for it on your Form 1040.

Keep in mind: This increased limit doesn't apply to non-cash donations. Those are still capped at 20-50% of your AGI, depending on what you're donating.

What organizations can you donate to for a tax deduction?

Not all donations are tax-deductible. The IRS has special rules about the kinds of organizations you can contribute to, as well as the sorts of contributions you can make. 

If you want to deduct it on your tax return, your donation has to go to a qualified charitable organization with 501(c)(3) status — a mouthful that essentially means it's tax-exempt.

Keep in mind: Not all nonprofits have 501(c)(3) status. Some veterans groups and political groups for instance, don't. As a result, donations to them won't always give you tax benefits, even though you’re contributing to a nonprofit.

Want to know if an organization qualifies? You can find out for sure with the IRS's Tax Exempt Organization Search tool. You can also use Charity Navigator to look up an organization's tax status.

Examples of qualifying organizations

Luckily, a wide range of charitable groups are tax-exempt. You can even look beyond the usual private foundations and public charity programs (like the ones affiliated with hospitals and educational institutions).

According to the IRS, the following types of groups can count:

  • 🏥 Charitable organizations, like the Red Cross and United Way
  • 🙏 Religious communities, like your church, synagogue, temple, or mosque
  • 🧪 Scientific institutions, like the the Association for Women in Science
  • 📚 Literary organizations, like the National Book Foundation
  • 🎒 Educational nonprofits, like Girl Scouts of America
  • ⚾ Amateur sports organizations. like the US Olympic & Paralympic Foundation
  • 🚸 Child advocacy groups, like RAINN
  • 🐼 Animal rights organizations, like PETA
  • 🇺🇸 Some government organizations (as long as the gift is earmarked for charitable purposes)

Note that church tithing counts as a charitable donation, so it’s tax-deductible.

What types of charitable gifts are tax-deductible?

As long as you're supporting a 501(3)(c) organization, various kinds of contributions can help you lower your tax bill. 

Here are the rules for donating money, items, and even your time.

Cash contributions

By cash, we mean any kind of dollar-amount contribution, whether it's made through:

  • 💵 Actual cash
  • 💳 Credit card or debit card
  • ✍️ A check
  • 🏦 Electronic fund transfer electronic (EFT)
  • 📱 An online payment service like PayPal or Venmo
  • 🎁 A gift card

Noncash donations

What if your charitable giving isn't in monetary form?

This is especially common for patrons of food banks and organizations like Goodwill. (Big-ticket donors will even offer luxury items, like paintings!)

Here are some noncash goods that might be donated:

  • 🥫 Food
  • 👚 Clothing
  • 👞 Shoes
  • 🛋️ Furniture
  • 📺 Appliances
  • 🚗 Cars
  • 💎 Jewelry
  • 🖼️ Art
  • 🕰️ Antiques

The IRS allows taxpayers to deduct the fair market value of any goods they donated — meaning, the amount they would sell for on the open market. 

Figuring out the value of noncash gifts

The fair market value of something can be hard to pinpoint — especially if you're dealing with secondhand goods. Here's what you might use to make a reasonable estimate:

  • The cost or selling price of the item
  • Sales of comparable goods
  • The cost of replacing it
  • Expert opinion

Pro tip: Look for a valuation guide. Local organizations will sometimes provide one on their website, with estimated values for the goods they get most often.

As for the bigger charities, Goodwill has their own valuation guide. So does the Salvation Army. Both give you a ballpark figure for commonly donated items in good condition.

Volunteer time

Volunteer work is a huge source of misconceptions. Taxpayers assume that, if they donate their time, they can write off its fair market value based on how much they earn when they're working.

Unfortunately, that isn't true. Volunteer time is never directly tax-deductible.

You also can’t deduct the expenses associated with spending your time on a charity, like the cost of childcare.

Volunteering expenses

The good news is, you can donate expenses that stem directly from your charity work. These might include things like: 

  • ⛽ Car expenses for drives over
  • 🚌 Public transport to and from the site
  • 👕 Uniforms to wear as a volunteer
  • 📦 Supplies you use while volunteering
  • 🍔 Meals, but only if you had to travel overnight

Note that, for car expenses, you can take a standard mileage rate for every mile you drive for charity. For the 2021 tax year — and into 2022 — that’s $0.14. (That’s much lower than the standard mileage rate for work-related driving!) 

These have to be out-of-pocket expenses — not reimbursed by the charity. And you'll need to keep records for everything you spent.

How volunteer expenses compare to work expenses

In a nutshell, these tax-deductible volunteer expenses are similar to the business write-offs you can take when you do freelance work. Instead of paying for them so you can do an independent contracting job, you're buying these things in order to volunteer your time. 

If you have business write-offs, use Keeper Tax to keep track of them automatically. Our app will scan your accounts and write off anything you bought for work.

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It won't track your charitable donations, but the app will deduct them for you if you file your taxes with Keeper Tax.

What records should you keep for qualified charitable contributions?

You'll have to keep records for your donations. Here's what's acceptable to the IRS: 

  • Bank statements
  • Credit card statements
  • Donation receipts
  • Cleared checks
  • Pledge cards

Just like keeping receipts for business write-offs, hoarding paper copies of your donation records isn't actually necessary. Digital proof, like a credit card statement that says "Greenpeace," is totally fine.

Just make sure your documentation shows the following information, whether it's paper or digital:

  • The organization you donated to
  • Donation date
  • Donation amount

Donations over certain limits have special requirements for recordkeeping. Let’s dive into those next.

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​For donations over $250

For donations worth over $250 you'll need a "contemporaneous written acknowledgement" from the charity you contributed to. (To count as "contemporaneous," you'll need to get this by the time you file your return.)

Basically, this is written proof from the charity. Their statement will need to include:

  • The amount of money you donated (if it was a cash donation)
  • A description if your donation (if it was a non-cash gift)
  • An explanation of whether the charity gave you something in return

How to handle quid pro quo contributions

Sometimes, you might get a gift in exchange for your gift — say, concert tickets or a bottle of wine. In that case, the organization will have to describe what they gave you and estimate how much it's worth. 

These are called quid pro quo contributions: “this for that,” meaning the donor gets something in return. For these, the IRS requires you to subtract the value of that thank-you gift from the donation you made when you claim your deduction.

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For noncash donations over $500

If you make enough non-monetary gifts, you'll have to fill out Form 8283, for "Noncash Charitable Contributions." 

The top of Form 8283, showing up to Box A of Part !

For noncash donations over $5,000

Donated something worth over $5,000 — say, fine art or a car? You'll have to attach a qualified appraisal to your Form 8283. Section B of the form deals with these big-ticket donations.

Section B of Form 8283, for information on donated property

Whether you’re donating cash, canned goods, or even antiques, your generosity makes the community stronger. Now that you know how to deduct your gifts, it can make your finances stronger too.

Keep giving back, and enjoy those tax breaks!

Soo Lee, CPA

Soo Lee, CPA

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Soo has over 10 years of experience in publicly traded companies and public accounting firms offering tax, accounting, payroll and advisory services to clients in diversified industries including manufacturing, wholesale/retail businesses, construction, real estate development and investment, banking, finance and professional/legal consulting service. In Particular, when Soo was at Pricewaterhouse Cooper, Soo worked with many foreign owned U.S. companies and advised clients on a broad range of issues including federal and state tax minimization especially through R&D tax credit, determination of the optimal structure for new foreign investments, restructuring and reorganization for existing operations.

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