The 5 Most Overlooked Tax Rules for Year-End Donations

As the year comes to a close, charitable giving often takes center stage. Whether you’re inspired by the season of giving or looking to reduce your tax bill, it’s important to make sure your generosity aligns with IRS guidelines. Overlooking key tax rules could mean losing out on valuable deductions—or worse, facing complications during tax season.

Here are five commonly overlooked tax rules to keep in mind when making year-end charitable donations:

1. You Must Itemize to Claim Charitable Deductions

Many taxpayers assume all donations are deductible, but that’s not the case if you take the standard deduction. To deduct charitable contributions, you must itemize your deductions on Schedule A of your tax return. This is worth considering if your total itemized deductions (including mortgage interest, state and local taxes, and medical expenses) exceed the standard deduction.

Tip: Review your deductions early to determine if itemizing is worthwhile this year.

2. Keep Proper Documentation

The IRS requires proof for every charitable contribution, regardless of the amount. For cash donations under $250, a receipt, canceled check, or credit card statement is sufficient. Donations exceeding $250 require a written acknowledgment from the charity, including the amount donated and whether you received any goods or services in return.

Tip: For non-cash contributions like clothing or household items, you’ll need a detailed receipt and, in some cases, an independent appraisal.

3. Timing Matters

To qualify for a deduction in the current tax year, your donation must be made by December 31. For checks and credit card donations, the IRS considers the date you mail the check or charge the card, not when the charity cashes or processes it.

Tip: If you’re planning to donate appreciated securities, start the process early. Transferring assets can take several days, and delays could push your gift into the next tax year.

4. Understand the AGI Limits

The IRS places limits on how much of your Adjusted Gross Income (AGI) you can deduct for charitable contributions. For cash donations, the limit is generally 60% of your AGI, while non-cash contributions like property are capped at 30%. Contributions exceeding these limits can be carried over and deducted in future years, but only for up to five years.

Tip: If you’re approaching the AGI limit, consider spreading out your donations over multiple years.

5. Donate to Qualified Charities

Not all organizations qualify for tax-deductible contributions. To ensure your donation is eligible, it must be made to a 501(c)(3) nonprofit organization. Political organizations, crowdfunding campaigns for individuals, and most overseas charities don’t qualify.

Tip: Use the IRS’s Tax Exempt Organization Search tool to confirm the charity’s status before donating.

Final Thoughts

Charitable giving is a meaningful way to give back, but ensuring your contributions align with tax regulations can make your generosity even more impactful. If you’re unsure about how to navigate these rules—or want to explore advanced strategies like donor-advised funds please feel free to reach out.

Ready to optimize your charitable giving strategy? Contact me today (jennifer.jenkins@bluestonewp.com) for a year-end financial planning session to ensure your generosity leaves a lasting impact—on your community and your finances.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.