Giving to a good cause is a meaningful way to make a difference. But if you’re aiming to get a tax deduction out of your generosity, it pays to understand the rules. From GoFundMes and Goodwill drop-offs to donating stocks or cars, the IRS has clear requirements on what counts as a deductible charitable donation and what doesn’t.

Ascend Senior Manager Roberta McCue talks us through how to make your charitable donations count at tax time. We cover the different types of donations, how to stay within IRS limits, what documentation you need, what can get flagged in an audit, and the One Big Beautiful Bill’s 2026 changes. Whether you’re giving cash, household items, appreciated stock, or a used vehicle, getting the deduction means following the rules, including making sure your gift goes to the right kind of organization.

What counts as a deductible donation?

To qualify for a charitable deduction, your donation must go to an organization that the IRS under section 501(c)(3) has granted tax-exempt status. That means charities, religious organizations, and other qualified nonprofits, not individuals or informal fundraising efforts.

Giving money to a friend in need or contributing to a GoFundMe campaign is generous. Still, unless the campaign is run by a verified 501(c)(3) nonprofit, it’s considered a gift, not a charitable donation, and is not tax-deductible.

Cash vs. non-cash donations

There are two broad types of charitable contributions: cash and non-cash.

Cash Donations

These include money you give via cash, check, credit card, or electronic transfer. They’re straightforward, but you’ll still need documentation. The IRS may not question small donations under $200, but keep a receipt or acknowledgment letter from the charity for anything over that amount. This letter should also confirm that you didn’t receive any goods or services in exchange for your donation, such as a magazine subscription or an event ticket. If you did, you can only deduct the portion of your contribution that exceeds the fair market value of what you received.

Cash donation claims are generally limited to 60% of your Adjusted Gross Income (AGI).

As of January 1, 2026, this 60% AGI cap will become permanent under the One Big Beautiful Bill Act (OBBB).

Non-Cash Donations

These include physical items like clothing, books, furniture, or even stocks and vehicles. Non-cash contribution claims are capped at 30% of your AGI. And the documentation rules get more complex.

If the total fair market value of your non-cash donations exceeds $500, you’ll need to provide more detailed information, including:

• Description of the items
• Date of the donation
• Name and address of the organization
• Fair market value and method of valuation
• Original cost (if known)
  

If the total value of any single category of items, let’s say, furniture or art, exceeds $5,000, you’ll also need a qualified appraisal.

Special cases: stock, cars & more

Stock Donations

Donating appreciated stock can be an efficient way to give. You get a deduction for the fair market value of the stock, and you avoid paying capital gains tax on the appreciation. No appraisal is needed if you have a statement or letter from the stock’s source showing the stock’s value at the time of donation.

Car Donations

Vehicle donations come with extra scrutiny. Whether the car is worth $600 or $6,000, you’ll need a specific IRS form from the charity documenting the donation, its value, and how the organization used the donation. If they sell it, your deduction is limited to the sale price. If they keep it and use it for charitable work, you can typically deduct the fair market value.

The IRS tends to audit vehicle donations more closely because people often overestimate their car’s worth. Accurate documentation and realistic valuation are essential.

Art and Other High-Value Property

Donating a valuable painting or piece of property? You’ll need an appraisal from a qualified expert in that field. The appraiser must complete a specific IRS form and sign it. You’ll attach this to your return to substantiate the deduction.

Just keep in mind: the cost of getting an appraisal is not deductible.

The importance of documentation

Whether you’re donating clothes or contributing $50,000 in stock, documentation is essential, especially if you ever face an audit. At a minimum, keep:

• Receipts from the charity
• Photos of donated items
• Acknowledgment letters stating no goods or services were received
• Appraisals for high-value items
  

Even a bag of clothes left in a drop-off bin should have some form of evidence. Without it, the IRS may disallow the deduction or reduce its value to the lowest reasonable estimate. That $150 stack of books might only be worth $40 to a thrift shopper, and that’s what the IRS will go with if you can’t prove otherwise.

Know when it counts

Charitable contributions must be made by December 31 of the tax year to count for that year’s return. You can’t backdate a gift from January and apply it to the prior year.

And while there used to be a $300 charitable deduction available even for those who didn’t itemize, that temporary benefit is no longer in effect. Today, if you don’t itemize your deductions, charitable donations won’t reduce your tax bill at all.

Starting January 1, 2026, a new OBBB benefit will apply. Even if you don’t itemize your deductions, you’ll be allowed to deduct up to $1,000 in charitable donations if filing as single, head of household, or married filing separately, or up to $2,000 if filing jointly.

Itemizing vs. standard deduction

To benefit from charitable deductions, currently you must itemize your deductions on Schedule A of your tax return. This includes medical expenses, mortgage interest, state and local taxes and charitable donations.

New rules apply from January 1, 2026. The OBBB introduces a new ‘floor’ for itemized charitable deductions. Your total donations must exceed 0.5% of your AGI to be counted. For example, if your AGI is $75,000, only donations above $375 can be deducted.

The standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. If your itemizable expenses fall short of that threshold, you’re still better off taking the standard deduction.

Starting in 2026, even if you take the standard deduction, you may still deduct up to $1,000 in charitable donations (or $2,000 if married filing jointly).

What about businesses?

Businesses can also make charitable contributions. Like individuals, they can donate cash or non-cash items, such as unused equipment or even food. Restaurants donating food, for example, can deduct the cost of the ingredients. Documentation is still required, and valuation should reflect fair market value.

For corporations, cash donations are typically limited to 10% of taxable income, while non-cash donations have additional considerations depending on the item donated and its use.

Effective January 1, 2026, corporate donations will also be subject to a minimum threshold. To qualify, total charitable donations must exceed 1% of taxable income. For example, a corporation with $75,000 in taxable income would need to donate at least $750 for the deduction to apply.

Donor-advised funds

Donor-advised funds are a popular way to manage charitable giving. You contribute money or assets to a fund, claim the deduction in the year you contribute, and direct the fund to distribute donations to 501(c)(3) organizations over time.

Since the donation technically happens when you contribute to the fund, you won’t see future distributions to charities on your personal return. Gains inside the fund are also not taxable to you, making this a strategic tool for long-term giving.

Five-year carry-forward rule

If your deductible contributions exceed the applicable AGI limits, you don’t lose them entirely. You can carry forward unused charitable deductions for up to five years. However, many individual taxpayers don’t hit the ceiling. In practice, high-income earners often have enough room to take full advantage of their donations in the year they’re made.

Once again, there’s consideration once the OBBB kicks in on January 1, 2026: high earners taxed at the 37% bracket will face new limits. Their itemized deductions, including donations, cannot reduce their effective tax rate below 35%. This means charitable deductions may be capped once this limit is reached.

Tips to keep in mind

• Get a receipt or letter for all donations, especially those over $200.
• Take photos of physical items donated and record their condition and value.
• Avoid overestimating the worth of cars, clothing or household goods.
• Use donor-advised funds for a more strategic approach to long-term giving.
• Make all donations by December 31 to claim them for that tax year.
• Keep your documentation organized in case of an audit.
  

Final thoughts about doing good

Donating to charity can be deeply rewarding. And, when done correctly, it can also offer meaningful tax benefits. But deductions don’t happen automatically. They require planning, proper paperwork and an understanding of the rules.

Whether you’re giving cash, cleaning out the garage, or transferring stock, ensure your donation goes to a qualified organization and is properly documented. That way, your good deed won’t just make an impact on others. It can benefit you, too.

Contact us for your tax strategy: info@ascendadvisors.com