Have you made contributions to charity this year, or are you considering making donations between now and year end? If so, it’s important to know how different types of donations impact tax deductions. That way, you can maximize your tax benefit — or at least avoid finding out at tax filing time that your charitable deductions are smaller than you expected.

For example, be aware that a new limit is in effect this year: a 0.5 percent floor on the charitable deduction for itemizers. This generally means that only charitable donations that exceed 0.5 percent of your adjusted gross income (AGI) will be deductible if you itemize deductions. So, if your AGI is $100,000, your first $500 of charitable donations for the year won’t be deductible.

Cash Donations

Let’s say you make a cash or cash-equivalent contribution to a qualified charitable organization. If you don’t itemize deductions, you can claim the new charitable deduction for non-itemizers of up to $1,000 ($2,000 for married couples filing jointly). Only cash donations qualify.

If you do itemize deductions, you can generally deduct the full amount of cash contributions once you’ve surpassed the new 0.5 percent floor. But your annual deduction is generally limited to 60 percent of your AGI. Any excess may be carried forward for up to five years.

Be aware that the IRS imposes strict recordkeeping rules for cash contributions. For instance, for cash donations of $250 or more, you must obtain a contemporaneous written acknowledgment from the charity before filing your income tax return.

Property Donations

Several special rules apply to charitable gifts of property. For starters, property donations are subject to lower annual deduction limits (which we’ll detail shortly).

On the plus side, there’s a big tax break if you donate certain appreciated property you’ve held longer than one year that would have qualified for long-term capital gains rates had you sold it instead of donating it. In this case, you can deduct the property’s current fair market value. Thus, any appreciation in value while you owned the property will be untaxed. Examples of eligible property include publicly traded securities and mutual funds. However, your annual deduction for such donations is typically limited to 30 percent of your AGI. 

For tangible property, how the charity uses the property may affect the amount of your deduction. For example, if you donate a car, unless it’s being used by the charity to further its charitable mission (such as a social services charity using a van to deliver meals to the elderly), you generally may deduct only the amount the charity receives when it sells the vehicle. But a 50 percent AGI limit typically applies to deductions for donations where you can’t deduct the fair market value, rather than the 30 percent limit. 

These are just a few examples of rules that apply to deductions for property donations. Contact us to find out the rules for specific property you’re considering giving to charity.

Quid Pro Quo Contributions

You can’t deduct the value of the time you spend helping a charity. But you can write off related out-of-pocket expenses, such as supplies and mileage, if you itemize deductions. The deductible mileage rate for charitable miles driven is 14 cents per mile.

Travel and lodging expenses can qualify, such as if you attend a convention as a delegate for the charity. However, travel expenses can’t be deducted if the trip is merely a disguised vacation. 

Achieving Your Charitable Goals

If you itemize deductions, charitable donations can be a powerful, tax-saving tool. But, as you can see, different types of donations impact your tax deductions. So, there’s much to consider as you plan your giving for the rest of the year. The tax professionals at Ramsay & Associates can answer your questions and help you create a charitable giving strategy for the remainder of 2026 that aligns with your philanthropic and tax goals.

Contact us today to get started.