This blog post has been recently updated to include new information from the 2025 tax bill relevant to how your charitable donations affect your tax bill.
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The Tax Benefits of Doing Good
You probably don’t donate to your favorite causes just to save on taxes. But doing good comes with a side benefit: charitable donations lower your tax bill.
Giving back has been part of my life for as long as I can remember. Long before I even knew what taxes were.
And since my kid was big enough to hold coins without trying to swallow them, it’s been part of theirs, too. Even when we haven’t had very much ourselves, we found a way to donate something to help those in need. Sometimes it was money, sometimes it was toys and books, and once it was a car.
We built a charitable habit that my kiddo follows to this day. Just like savings, adding donations into your budget helps keep up and strengthen that habit of giving.
And, honestly, the tax deduction is a nice bonus. It frees up even more cash to give.
Here’s a look at the tax different breaks you can get for doing good.
Deduct Your Charitable Donations If You Don’t Itemize
Before the new (otherwise horrible) bill was passed, people who took the standard deduction didn’t get any donation-related tax breaks. That didn’t stop them from giving, of course, but the tax break would still be nice.
Then the “one big awful bill” happened and changed that.
Now, even if you don’t itemize, charitable donations can still lower your tax bill starting with tax year 2026. You can take the standard deduction AND a special $1,000 deduction for cash donations to charity. And the deduction doubles to $2,000 if you’re filing a married-joint tax return.
The extra deduction will show up on its own line on your 2026 tax return (filed in 2027). It’s easy to spot and easy to use.
But make sure to keep proof of your donations just in case the IRS wants to see it. What counts as proof?
- A receipt from the charity
- A cancelled check
- Your credit card bill
Make sure you donate to qualified organizations. There are a lot of scam “charities” out there, so do your homework and check. You can find out whether or not an organization is legit by looking them up on CharityWatch.
The Rules for Deducting Donations When You Itemize
Charitable donations have always lowered taxes for people who were able to itemize deductions on Schedule A.
Here, you can deduct more than $1,000 in cash donations. You can also get deductions for:
- Any items you give, from your kids’ outgrown clothes to rocking chairs to vehicles
- Expenses you pay while volunteering, such as buying supplies to make posters
- Mileage for charitable use of your vehicle, like for delivering meals to people or transporting rescue dogs
IRS Rules
Under the New Law:
The new (horrible) tax bill added some new parameters for deducting charitable donations on Schedule A that will kick in for tax year 2026.
First, they added a new floor of 0.5% of AGI (adjusted gross income). Starting in 2026, itemizers can only deduct charitable donations in excess of 0.5% of AGI. For example, if your AGI was $60,000, the first $300 wouldn’t be deductible, but any donations in excess of that would be.
Second, they capped the maximum tax benefit to 35%, even for people in the higher 37% tax bracket (for example, single people who earn more than $626,350 in 2025). That means people in the highest tax bracket will get a slightly smaller tax break for the same donation. For example, if they donate $1,000, the tax break would be $350 rather than $370.
For Cash Donations:
If you donate $250 or more, the IRS requires a written acknowledgment from the organization. Your own cancelled check or credit card record won’t do here.
As for deduction limits, you can normally deduct up to 60% of your Adjusted Gross Income (AGI) for cash donations. Of course, because it’s tax law, there are some exceptions to that (see IRS Pub 526).
For Donated Items:
First thing: Get detailed receipts from the charity for every item you donate. It’s a good idea to create an itemized list when you donate. If it’s a bunch of stuff with minimal value, you can group it like household goods, books, and clothing for the list. You can also include the approximate “yard sale” value at the time, so you don’t have to figure it out months later at tax time.
If any of your donated items (including grouped items) is valued at more than $500, you’ll need to include IRS Form 8283 in your tax return. If any single item is worth $250 or more, you need a receipt that clearly shows the value of the item on the date of donation.
As for deduction limits, you can normally deduct up to 30% of your AGI for non-cash donations.
Make Direct Donations From Your IRA
Once you’ve reached age 70.5, you can qualify for a special tax break. If you continue charitable donations after retirement, you can make the contributions directly from your traditional IRA to significantly lower your tax bill.
Here’s how this special rule changes your tax situation:
When you take money out of your traditional retirement account, you have to pay income taxes on the amount you withdraw. That amount gets included in your taxable income, sometimes bumping you up into a higher tax bracket. If you then take that money and donate it to charity, you can include it in your deductions to get a tax break.
Using a Qualified Charitable Distribution (QCD), you can avoid income taxes completely on the entire amount you donate. That money goes directly from your IRA to the charity, and it won’t be included as part of your taxable income. This keeps your AGI lower and lands you in a lower tax bracket.
You also don’t have to bother with itemizing deductions for this to work. This strategy bypasses your tax return altogether. This tax-saving strategy works especially well if you don’t need your RMDs (required minimum distributions) but are forced to withdraw the funds anyway. You can learn more about RMDs and other beneficial retirement tax strategies in the updated version of my book Retirement 101, 2nd Edition.
It’s Nice to Be Generous, Especially When You and the Recipients Both Get Benefits
Giving generously is its own reward… but an extra benefit in the shape of a tax break doesn’t hurt. That’s part of the reason tax breaks are such a valuable tool. You get to lower your taxes and feel good about doing it.
I show you how to benefit more often from tax breaks and use your wealth wisely in other ways in my recently updated book, Retirement 101, 2nd Edition. I’ll walk you through the ins and outs of retirement planning and answer questions like:
- How much do I need to retire?
- What is the “official” retirement age?
- Can I retire early?
- What if I want to keep working?
And many more.
This book is a clear, comprehensive guide that will help you set yourself up for a happy, comfortable future, regardless of where you are in your working life.
Click on the button below to learn more and get your copy now.
If you need help figuring out where donations fit on your tax return, feel free to contact me here.