Navigating Charitable Contributions
What makes a charitable contribution deductible?
The first question that many taxpayers have when it comes to charitable contributions is what makes a charitable contribution deductible? The primary requirements are:
· It must be made directly to a 501(c)3 non-profit organization. This includes charities as well as educational and religious institutions
· No goods or services are received in exchange for the donation
Non-deductible
· Political campaign donations or donations used for lobbying purposes
· Raffle tickets
· Personal donations such as memorials or go-fund-me drives
If you are ever in doubt on whether an organization is eligible to receive tax deductible donations, the best place to check is the donations page of the organization’s website. Most organizations will list the deductibility of contributions to the organization on their page. Some politically leaning organizations have education divisions as well a lobbying and campaign divisions…these organizations may list options and will disclose whether a particular contribution is deductible or not.
Substantiation requirements (cash and non-cash)
Cash Donations:
Under $250 – basic receipt, credit card statement or cancelled check
Over $250 – Written acknowledgement contemporaneously received from the non-profit. The IRS considers contemporaneous receipt to be by the filing deadline for the tax year. The written acknowledgement must include the date of the contribution, amount of the contribution and a statement that no goods or services were received in exchange for the donation (or the fair market value of the good or services received).
Non-Cash contributions – refer to page 20 of IRS Publication 526
Qualified Charitable Distributions (QCDs) from IRA Accounts
For taxpayers over 70 ½ years old at the end of the tax year, donations to charities can be made directly from IRAs. These are called Qualified Charitable Distributions (QCDs). QCDs offer several advantages:
· The contribution is excluded from your income completely. This means that you can take the standard deduction on top of the charitable contribution. This also means that the contribution is taken from your income before other calculations are made, such as the taxable portion of Social Security benefits and the Net Investment Income Tax (NIIT)
· For those taxpayers required to take minimum distributions (RMDs) from the IRAs, QCDs count towards your RMD
The substantiation requirements for QCDs are the same as other charitable contributions. Taxpayers will also want to get a list of QCDs from the custodian of the IRAs, as QCDs amounts are not reflected on form 1099-R.
Minnesota Deduction
Minnesota offers a limited deduction for charitable contributions for taxpayers who take the standard deduction. The deduction from your Minnesota income is 50% of your contributions over $500 each year. For example, if you make $2,000 of charitable contributions and take the standard deduction, Minnesota will give you a subtraction of $750 from your Minnesota taxable income.
OBBBA Changes for 2026
HR1 (also known as the One Big Beautiful Bill Act) added some new rules regarding charitable contributions. First off, taxpayers will be able to deduct up for $1,000 ($2,000 for Married Filing Jointly returns) of cash contributions without itemizing.
For those who do itemize, there will be a 0.5% floor on charitable contribution deductions. This means that for a taxpayer with an adjusted gross income of $100,000, the first $500 in charitable contributions will not be deductible.
This content is informational only and does not constitute tax, legal or professional advice. While best efforts are made to ensure all information is accurate at the time of posting, tax laws and guidance from regulatory agencies are subject to change. For personal tax advice, please contact our office to schedule a tax planning appointment.
