Tips for Charitable Giving and Maximizing Charitable Tax Deductions

Giving back to those who are less fortunate can give renewed purpose to money. Many people enjoy seeking out causes they support and getting involved by giving donations. Donating is a very generous act, but in addition, there are ways to maximize how much you’re able to give by planning carefully to take advantage of possible tax deductions.

Everyone has different goals and ideas for how they will use their money, especially those who may not yet consider themselves wealthy. Maybe you want to feel more secure or take care of your family, or perhaps leave a legacy. Maybe you just want to purchase some luxurious items you never thought you could afford. Regardless, many who achieve and surpass their ideas for wealth find that some of their goals were less rewarding than others and may find themselves feeling unmotivated and wondering what to do next.

Steps to Maximizing Charitable Tax Deductions

Donations of products and money to recognized charitable organizations can be deducted from your taxable income, lessening your tax burden. Deductions for charitable contributions are normally limited to 60% of your adjusted gross income, while there are exceptions where limits of 20%, 30%, or 50% may apply. Even if you aren’t making particularly large donations, you can still benefit from these strategies. To claim donations, you’ll need to be organized when tax time rolls around. Get ahead and avoid last-minute stress by following the steps below:

  1. Plan your donations.
    It’s a good idea to consider where and how much you’d like to donate this year so you can plan and ensure you’re donating to organizations that are eligible for tax deductions. To check if you are donating to an eligible organization, visit the IRS website. Eligible organizations include:
    1. Religious organizations like churches, synagogues, and mosques
    2. Community organizations like the Boy Scouts of America™, Girl Scouts™ and the Boys and Girls Clubs of America™
    3. Educational organizations including schools, colleges, museums, and zoos
    4. Charitable organizations like Goodwill®, United Way™ and Salvation Army ®
    5. Nonprofit hospitals and medical centers
    6. Other tax-exempt nonprofit organizations

  2. Keep track of all eligible donations throughout the year.
    Be sure to keep track of your donations and receipts to make it easier when tax season arrives. Note the name of the organization you’re donating to and ensure you’re donating to reputable charities so that your generosity can truly make a difference (and to ensure you get the tax break). You also need to track anything you received in return for your donation. For example, if you participate in an auction on behalf of a charity, you can still benefit from a tax deduction even if you purchase an item. You’ll simply have to subtract the value of the item from how much you paid to determine if you’re eligible for a tax break and if so, how much you can claim.


     3. Don’t forget to track excess donations.

         With a bit of planning and organization, you can use donations for tax savings that can make your donations go further.


Strategies for Charitable Giving

Charitable donations are a generous way to give back and share your success with those who have been less fortunate. Regardless of benevolent intentions, there’s no reason not to use a bit of careful planning and strategy to make charitable giving more efficient and maximize tax deductions.

  • Donate appreciated assets
    By donating appreciated assets, such as stock, you can avoid paying capital gains taxes and maximize the value of your charitable donation.

  • Bundle donations
    Rather than donating small amounts each year, consider saving up and making all the donations in one year. This allows you to itemize deductions that year and then take advantage of the advanced standard deduction in future years.

  • Donor-advised funds
    By working with an existing charitable organization (501(c)(3)) to create a fund and advise on the donations, you can benefit from an initial tax deduction when the fund is created and still take advantage of the increased standard deduction in years ahead.

  • Life income gifts
    Charitable remainder trusts and charitable gift annuities are a great way to receive a tax deduction today and benefit charity in the future.

  • Donate from an IRA
    If you’re over 70.5, you can donate directly from your IRA account. This allows you to avoid income tax and give directly to the charity.

  • Make charitable swaps
    “Swap” stocks by donating blocks of stock to a charity and then replacing them with an identical block of stock at current market prices. This allows you to give a charity a stock that you believe will be valuable for them while keeping the stock yourself and benefitting from tax deductions.

  • Donate household items
    While often overlooked, donating gently worn clothing, books, and other household items to charities like Goodwill is an easy way to clean out your house and get a tax break.

There are many ways to donate, and the best strategy for you will depend on your specific situation and the types of charities you’d like to donate to. Your financial advisor can assist you in exploring the many options and understanding which may be best for you and why.


Key Takeaways

Getting involved in a charity by donating is a generous way to share your wealth with those who need it most. It enables you to support causes that are important to you, especially if you don’t have the time to volunteer. Planning for tax season so that you can benefit from deductions is a great way to make your donation dollars go further. However, you need to understand the rules and requirements to fully reap the benefits. Starting early, tracking throughout the year, and working closely with an expert will ensure you get the tax deductions you’ve earned!

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Insight Wealth Strategies, LLC (IWS) and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.