During times of charitable giving, such as in the holiday season, it is common to look for ways to give back to the community while reaping some tax benefits. One effective option is to make tax-deductible charity donations. These donations not only support charitable causes but also reduce one’s tax liabilities. This invariably helps in making the donations more impactful on the personal front as well as in communities one wishes to support.

Cash donations
One can make monetary donations to public charities, which are eligible for tax deductions under 501(c)(3). These donations can be made through checks, credit cards, or payroll deductions through their employer. If the donor itemizes their deductions, they can receive deductions of up to 60% of their adjusted gross income (AGI) in a year for gifts of cash to qualified public charitable organizations. If they choose to donate to private charities, such as a family foundation, the annual limit of deductions is approximately 30% of their AGI. However, the donated amount must be substantial to avail of this deduction. Another option is to bunch together several small donations into a single year.

Charitable gift funds
One can also set up donor-advised funds. These are accounts that offer the flexibility of charitable giving to multiple organizations. The process of opening an account is simple and cost-effective compared to donating to private charities. One can recommend grants to specific charities through this account. At the same time, one can also avail of immediate tax benefits.

Appreciated assets like stocks or securities
Donating appreciated assets such as securities and stocks can bring in dual benefits. For instance, publicly traded stocks, bonds, mutual funds, securities, or any type of asset that has the potential to appreciate in value can attract a substantial capital gains tax whenever one decides to sell them. By choosing to gift these assets to a qualified charitable organization, one can get a tax deduction for the full market value of the assets while avoiding excessive capital gains taxes. However, the tax deductions will not exceed 30% of one’s AGI if the assets are gifted to a public charity. In the case of a private charitable organization, the tax deduction will be about 20% of the AGI.

Donation of goods
Charity gifts that include furniture, clothing, and household items are tax deductible. The only condition here is that the donations should be made to IRS-qualified charities. Also, one needs to keep detailed records of every item that has been donated. These details include the condition of each item, the quantities donated, and other descriptions. If any of these items have a value of more than $250, one needs to get a confirmation about the donation from the charitable organization. This confirmation can be in the form of a receipt or acknowledgment slip. Ensure that this has a record of the estimated value of the donation or the size of the donations, such as three bags of winter clothing.

IRA charitable rollover
For individuals above the age of 70, a great option for tax-deductible charitable donations is to donate from their IRA directly to a qualified charitable organization of their choice. Seniors can donate up to $100,000. When filing taxes, this donation will be included in the required minimum distribution and will not be added to taxable income.

Vehicle donations
Donating a vehicle can also bring in significant tax deductions. One can donate a car, boat, truck, or any other type of vehicle to eligible charitable organizations. The amount of tax deductions that will be received will generally depend on the fair market value of the vehicle and how the charity will use the donated vehicle. For example, if the charitable organization decides to sell the vehicle to a needy individual at a discounted price or wants to keep it for their own use, one can claim a tax deduction on the fair market value.

Volunteer expenses
While one may not be able to get deductions on the value of the time they have given volunteering, it is possible to avail of tax deductions for volunteer-related expenses such as gas mileage, parking fees, and supplies purchased for charitable work. All these can be used to get tax deductions provided one volunteer for an IRS-eligible charitable organization. To avail of these tax benefits, it is important to ensure that the expenses one claims are directly connected with the volunteer services one has worked with. Also, one must retain all the receipts of every expense made during the volunteer period.

Real estate or property
If someone donates real estate or property to a qualified charitable organization, they can avail tax deductions on the asset’s fair market value. However, if the donated assets include works of art or investments that have the potential to appreciate in value, there may be additional rules that need to be followed to qualify for deductions. For non-cash property donations valued over $5,000, an appraisal of the property may be required to determine its value accurately.

Educational charitable contributions
One can also get tax deductions on donating to eligible educational institutions and scholarships. But, before donating, one must ensure that the institution or organization one has chosen to donate to meets the IRS criteria for educational purposes.