The holiday season is a time for giving, and for many, that generosity extends to the causes and organizations they care about most. What you may not realize is that with a smart tax strategy, your charitable donations can not only make a significant impact on your chosen charities but also on your tax situation. At Lightening the Load, we’re here to help you make your giving go further.
Here’s a guide to strategic charitable giving as the year draws to a close.
The Golden Rule of Giving
To be tax-deductible, your donation must be made to a qualified charitable organization. This means the charity must be a public charity, private foundation, or other organization approved by the IRS. A quick check on the IRS website can confirm an organization’s status.
Cash vs. Non-Cash Donations
When it comes to giving, you have a choice between donating cash and non-cash items.
- Cash Donations: These are the most straightforward. Keep meticulous records, including receipts, bank records, and a written acknowledgment from the charity for any donation of $250 or more.
- Non-Cash Donations: Items like clothing, household goods, or vehicles can also be donated. Generally, you can deduct the fair market value of the item, but there are special rules to follow. For high-value items, you may need to get a qualified appraisal.
The “Bunching” Strategy
With the higher standard deduction, many taxpayers no longer itemize their deductions every year. If your itemized deductions don’t exceed the standard deduction this year, you might not see a tax benefit from your donations.
A smart tax strategy is to “bunch” your donations. This means consolidating several years’ worth of charitable contributions into a single year. In that year, your itemized deductions would likely exceed the standard deduction, giving you a significant tax benefit. You can then take the standard deduction in the following years.
New Deductions for Non-Itemizers
The new tax bill also introduces a new charitable deduction for those who do not itemize. Starting in 2026, you may be able to deduct up to $1,000 for single filers and $2,000 for married couples filing jointly for charitable contributions made.
Make your giving go further this holiday season. We can help you structure your charitable donations for maximum tax benefit. We are here to help!
