Charitable Deduction
An itemized deduction for donations to qualified charitable organizations. Cash donations are generally deductible up to 60% of AGI; appreciated property donations up to 30%.
The charitable deduction allows you to reduce your taxable income by the amount you donate to qualified 501(c)(3) organizations when you itemize. Cash donations are generally deductible up to 60% of your AGI, while donations of appreciated property (like stocks) are limited to 30% of AGI. Excess donations can be carried forward for up to five years.
To claim the deduction, you need documentation. For cash donations of $250 or more, you need a written acknowledgment from the charity. For non-cash donations over $500, you must file Form 8283. Donations of property over $5,000 generally require a qualified appraisal.
Strategic charitable giving can enhance your tax benefits. Donating appreciated stock avoids capital gains tax while giving you a deduction for the full market value. Donor-advised funds let you bunch multiple years of giving into one year to exceed the standard deduction threshold, then distribute the funds to charities over time.
How it works
The charitable deduction reduces your taxable income by the amount you give to qualified 501(c)(3) organizations, but only if you itemize on Schedule A rather than take the standard deduction. Cash gifts are deductible up to 60% of your AGI in a given year, while gifts of appreciated property such as stock are limited to 30% of AGI — a lower ceiling because the deduction is based on the property's full market value rather than what you originally paid for it.
You report charitable gifts on Schedule A, and the documentation requirements scale with the size of the gift: any cash donation of $250 or more needs a written acknowledgment from the charity, non-cash donations over $500 require Form 8283, and property donations over $5,000 generally need a qualified appraisal. Missing this paperwork can cost you the deduction even if the gift itself was genuine and the charity is legitimate.
Because gifts must exceed the standard deduction combined with your other itemized deductions to provide any tax benefit at all, many taxpayers now use "bunching" — concentrating two or three years of planned giving into a single tax year, often through a donor-advised fund, to clear the standard-deduction threshold in that one year while still distributing the money to charities over time. Donating appreciated stock instead of cash lets you avoid paying capital gains tax on the appreciation while still deducting the stock's full market value, a combination worth more than donating the equivalent amount in cash.
Example: donating appreciated stock vs. cash
A taxpayer wants to donate $10,000 to a favorite charity and owns stock worth $10,000 that they originally bought for $4,000. Donating the stock directly avoids capital gains tax on the $6,000 of appreciation entirely, while still providing a $10,000 charitable deduction, assuming it stays within the 30%-of-AGI limit for appreciated property.
Had the taxpayer instead sold the stock first and donated the cash proceeds, they would have owed capital gains tax on the $6,000 gain before donating, leaving less money to give and no additional tax benefit over donating the shares directly.
Frequently asked questions
What's the limit on charitable donations I can deduct?
Do I need a receipt for charitable donations?
Is it better to donate stock or cash to charity?
Related Terms
Itemized Deduction
Specific expenses you can deduct instead of taking the standard deduction, including mortgage interest, state/local taxes (SALT cap: $40,000 for 2025+ under OBBBA, phased out for high earners), charitable donations, and medical expenses.
Adjusted Gross Income (AGI)
Your gross income minus specific adjustments such as student loan interest, IRA contributions, and self-employment tax. AGI is the starting point for calculating your taxable income.
Standard Deduction
A fixed dollar amount that reduces your taxable income, available to all filers who do not itemize. For 2025, it is $15,750 for single filers and $31,500 for married filing jointly (OBBBA-adjusted).