Charitable donations: 7 Powerful Tax Strategies to make an impact

Charitable donations are an excellent way to help your favorite cause, church, foundation, school, or other registered charitable institution of your choice. Americans made $592 billion in charitable donations in 2024, which was 6.3% higher than in 2023. The average annual household contribution was $2,534. In 2021, the majority of charitable dollars went to religion (24%), education (14%), public-society benefit (11%), and health (10%)

Charitable donations are also a powerful tool to reduce your overall tax liability to the IRS. By carefully following tax laws and IRS rules, you can substantially increase the impact of your donations. Here is what you can do.

1. Meet the requirements for charitable donations

You can receive tax deductions for your donations as long as they meet specific requirements. Some of the most important rules are:

• You have to give to qualified charitable organizations approved by the IRS. The charity can be public or private. Usually, public charities receive more favorable tax treatment.
• You need to have a receipt for your gift.
• You need to itemize your tax return to claim most charitable deductions. However, beginning in 2026, non-itemizers can claim a limited deduction for cash gifts.
• Donations apply to the same tax year in which you make them. For most individuals, the tax year and calendar year are the same.
• All gifts are valued at fair market value. Depending on your donation, the fair market value may differ from the initial cash value.
• You have to transfer the actual economic benefit or ownership to the receiver of your gift.

There are many ways to give. Some are straightforward, and others are more complex and require professional help. Each has its rules, which you need to understand and follow strictly to receive the highest tax benefit.

2. Give cash

Giving money is the easiest way to help your favorite charitable cause. For gifts to qualified public charities, the IRS allows for charitable deductions for as much as 60% of your Adjusted Gross Income (AGI). This limit is now a permanent provision of the tax code. You can carry over in future years any amounts that exceed this limit. However, you must keep a record of your cash donations.

“Above-the-Line” Deduction for Non-Itemizers

Starting in 2026, taxpayers who do not itemize (i.e., take the standard deduction) become eligible for a modest charitable deduction:

• Up to $1,000 for single filers.
• Up to $2,000 for married couples filing jointly.
• Only cash donations to qualified public charities qualify.
• Gifts to donor-advised funds (DAFs) or many private foundations are excluded.

3. Give Household goods

You can donate clothes, appliances, furniture, cars, and other household items in good condition. The items will be priced at fair value. In most cases, the value will be lower than what you paid for them. This category is also subject to the 50% limit of the AGI.

Donating household items is a great way to clear out your closet of old clothes and shoes you haven’t worn in years. You can even donate your old car that’s been collecting dust in the garage. Moreover, if you plan to remodel a kitchen, you can give your old cabinets and appliances to charities like the Salvation Army. Remember to keep the receipts for these items in case the IRS asks you for them.

4. Donate Appreciated assets

One of the most popular tax-saving strategies is donating appreciated assets directly to charitable organizations. This approach is subject to a 30% of AGI for donations given to qualified public charities. Appreciated assets can include publicly traded stocks, restricted stocks, real estate, privately held companies, collectibles, and artwork. The main caveat to receiving the highest tax benefit is giving the appreciated asset directly to charity rather than selling it and gifting the proceeds. This way, you will avoid paying a capital gain tax on the sale of your asset and deduct the full fair value of your asset.

 Let’s look at an example. An investor in a 28% tax bracket is considering donating an appreciating stock to her favorite charity. She can sell the stock and give the proceeds or donate the shares directly. The current market value of the stock is $100,000. She purchased it more than one year ago for $20,000. The total capital gain is $80,000. 

The investor is achieving three essential goals by giving the stock directly to her favorite. First, she is not paying capital gains tax on the sale proceeds. Second, she can use the full fair value of the stock (rather than the proceeds from the sale) to reduce her tax liabilities. Third, the charitable organization receives an asset with a higher value, which they can sell tax-free.

5. Make a direct IRA charitable rollover

Donations made directly from your IRA and 401 (k) accounts are another way of reducing your tax bill. If you reached 72 (70 ½ if you turned 70 ½ in 2019), you could make up to $100,000 a year in gifts to a charity directly from your IRA or 401 (k) accounts. Those contributions count towards the required annual minimum distributions you must take once you reach 72 or 70½, respectively. They also reduce your adjusted gross income. To be compliant, you have to follow two simple rules.

Your plan administrator must issue a check payable to your chosen charity. Therefore, the funds have to be transferred directly to the charitable organization. If the check is payable to you, this will automatically trigger a tax event for the IRS. In that case, your IRA distribution will be taxable as ordinary income, and you will owe taxes on it. The second rule is that you must complete the transfer by December 31 of the same calendar year.

6. Consolidate your donations

Relatively small charitable donations may not be tax-deductible at all. Because of inflation adjustments under the new law (One Big Beautiful Bill Act, OBBBA), for the 2026 tax year, the standard deduction amounts are:

Standard deduction amounts

	2025 tax year	2026 tax year
Individuals	$15,750	$16,100
Married couples filing jointly	$31,500	$32,200
Heads of households	$23,625	$21,150

To maximize the tax impact of your donations, you may need to consolidate small annual contributions into a single year.

7. Meet the new AGI Limit for Itemizers

If you continue to itemize deductions, the charitable giving rules change materially in 2026 under OBBBA.

New 0.5% AGI “Floor.”

Starting in 2026, itemizers can deduct charitable contributions only to the extent that total qualified contributions exceed 0.5% of their adjusted gross income (AGI). Contributions up to that floor yield no deduction.

Example: If your AGI is $200,000, the first $1,000 (0.5% of AGI) of your donations isn’t deductible. Only the amount exceeding that qualifies.

According to some tax-law interpretations, these non-deductible amounts may still be carried forward and could become deductible in a future year (assuming future donations exceed the floor)

Existing AGI-based Limits Still Apply

The usual percentage limits remain in place. For instance, cash gifts to public charities remain subject to a 60% of AGI limit. For 2026 and beyond, the 60% limit is now permanent.

Gifts of appreciated assets (stocks, real estate, etc.) remain subject to 30% of AGI-based limits for deductibility.

Cap on Itemized Deduction Benefit for High Earners

For individuals in the highest federal tax bracket (37% before 2026), the tax benefit of charitable deductions (and other itemized deductions) will now be capped: the effective deduction value is limited to offsetting at 35% of the donation amount rather than 37%.

In practical terms: a $100,000 gift that might have saved $37,000 in tax under old rules now yields only $35,000 tax benefit for those top-bracket donors (before other limits).