Smart Strategies to Maximize Your Charitable Deductions
By Mark Yatros
Around this time of year, many of my clients start looking for ways to give back to causes they care about. I happily endorse charitable donations because they are a great way to support meaningful work in the community and can also offer helpful tax breaks.
However, timing and preparation matter – if you wait until the last minute, you might miss out on deductions or forget the necessary paperwork. With some planning, you can maximize your charitable impact and ensure you have everything ready for tax season.
Read on for tips to make the most of your donations.
Knowing when to itemize for charitable deductions
Charitable giving can help lower your tax bill, but only if you itemize deductions. Not everyone benefits from itemizing, so you must know if it makes sense for your situation.
To see if itemizing is worth it, add up your deductible expenses – like mortgage interest, state and local taxes, medical expenses, and charitable donations. In 2024, the standard deduction is:
$14,600 for single filers
$21,900 for a head of household
$29,200 for married couples filing jointly
If your total deductions exceed this amount, itemizing could save you more than taking the standard deduction.
Keep in mind that not all donations qualify for deductions. To get a tax break, your contributions must go to eligible organizations, such as 501(c)(3) nonprofits, religious groups, and certain public institutions. You can quickly check if an organization qualifies by visiting the IRS website. This simple step can help ensure your donation is eligible for a deduction.
Smart ways to maximize your tax deductions
Once you’ve determined that itemizing is right for you, there are several strategies to help you get the most out of your charitable contributions:
Bunching donations
If your total deductions don’t typically exceed the standard deduction, consider “bunching” multiple years’ worth of donations into a single year. This can push your deductions over the standard deduction threshold, allowing you to itemize in one year and take the standard deduction in others. This approach can reduce your overall tax burden while still allowing you to support your favorite causes regularly.
Using a donor-advised fund
A donor-advised fund lets you make a large donation now, claim the tax deduction, and decide which charities to support over time. This strategy is ideal if you want immediate tax benefits but prefer to distribute your contributions over several years.*
Donating appreciated assets
While cash donations are straightforward, donating appreciated assets like stocks or real estate can provide additional tax benefits. When you donate assets that have increased in value and have been held for over a year, you avoid capital gains taxes and receive a deduction based on the asset’s fair market value. This is a powerful way to support charities while maximizing your tax savings.
Pro tip: If you’re considering bunching donations or using a donor-advised fund*, speak with a financial advisor or tax professional to see if these strategies align with your financial goals. My colleagues and I at Allegiant Wealth Strategies are here to help; you can reach us at 269-218-2100 or visit us on our website.
Keeping track of your donations and IRS requirements
To ensure your donations qualify for deductions, it’s essential to keep proper records and follow IRS guidelines:
Documentation for cash donations
For any donation of $250 or more, you’ll need a written receipt from the charity showing the amount you gave and confirming you didn’t receive anything in return. Smaller donations also require proof, such as a receipt, canceled check, or bank statement.
Extra steps for non-cash donations
If you’re donating items instead of cash – such as clothes, household goods, or even a car – there are specific requirements. The IRS asks for additional details for donations valued over $500, like how and when you got the item and its fair market value. Donations worth over $5,000 generally need an official appraisal.
Timing
Donations must be made by December 31 to count for the current tax year, whether you mail a check or make an online contribution. Planning ahead and keeping all necessary documents in one place can make tax time easier and help you get the most benefit from your generosity.
Pro tip: Keep a dedicated folder – digital or physical – for donation receipts and paperwork. This small habit can streamline tax prep and protect your deductions in case of an audit.
Common mistakes to avoid
Even with the best intentions, there are a few common mistakes that can impact your charitable deductions:
Overestimating non-cash donations
Used items, like clothes and household goods, must be valued at fair market prices, often lower than their original purchase price. Using a reliable guide or online tool can help you avoid potential issues. One online tool that can help determine fair market prices is TurboTax’s itsdeductibleonline.
Donating to ineligible organizations
Only certain nonprofits qualify for tax deductions, so make sure the organization meets IRS guidelines before you give. Checking an organization’s status on the IRS website can help prevent surprises when you file.
Not having proper documentation
Precise records are critical. For donations of $250 or more, you’ll need a written acknowledgment from the charity, while non-cash donations over $500 require extra information, and those over $5,000 usually need an appraisal. Keeping thorough documentation can protect your deductions if the IRS requests proof.
Pro tip: Make a checklist for donations, including the receipt requirements for different types of contributions. Reviewing this list before donating can save you from missing deductions and give you peace of mind come tax season.
Concerned about maximizing your donations? Get assistance
Maximizing the impact of your charitable giving can get complicated, but you don’t have to go it alone. My colleagues and I at Allegiant Wealth Strategies are here to help you make the most of your contributions and navigate any challenges. For a free, no-strings-attached consultation, click here or call (269) 218-2100.
* Generally, a donor-advised fund is a separately identified fund or account that is maintained and operated by a section 501©(3) organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the organization has legal control over it; however, the donor, or donor's representative, retains advisory privileges with respect to the distribution of funds and the investment assets in the account. Donors take a tax deduction for all contributions at the time they are made, even though the money may not be dispersed to a charity until much later.
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.
Allegiant Wealth Strategies offers securities and advisory services through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Allegiant Wealth Strategies has offices in Battle Creek and Portage, Michigan, from which we serve Calhoun County, Kalamazoo County, and Kent County (Grand Rapids). The Allegiant Wealth Strategies team offers no-obligation financial planning consultations; call 269-218-2100 or contact us here.