Questions & Answers About Year-End Charitable Contributions—by Dolores Swirin-Yao     

As the end of the year approaches, many people have questions about making year-end charitable contributions.  Here are some of the questions I have been asked over my thirty-eight years working in nonprofits, including some questions that have come up in recent years due to changes in the tax law.  This is general information, not tax advice.  Please contact your tax advisor for specific advice for your own circumstances. 

When do I have to make my contribution to get credit for the 2024 tax year?

Nonprofits especially appreciate when donors make recurring gifts, which help the organizations forecast income, and unrestricted gifts, which help nonprofits carry out their core missions and maintain infrastructure. 

What documentation of my contributions do I need?

For contributions under $250, you must have a bank record or written communication from the charitable organization substantiating the amount and date of the gift.  For contributions of $250 or more, even if you have a bank record, you must also have the written acknowledgment from the charity.  And be careful to claim only the amount that is deductible.  Raffle tickets are not deductible.  Neither is the actual cost of a fundraising dinner.  Most organizations will indicate in their receipts how much of the cost of the ticket is deductible and how much is the fair market value of the benefit you received—that is, how much the dinner would have cost if you dined in a restaurant.  If you purchase an item at a charity auction, only any amount above the fair market value of the item is deductible. 

What about in-kind (non-cash) gifts?

The IRS requires the donor, not the charity, to place a value on the donated goods.  The charitable organization simply states what was received, for example, a bag of clothing or a laptop computer.  In order for your gift to count for 2024, it needs to be made before December 31.  If your total deduction for noncash gifts is greater than $500, you will need to file IRS Form 8283.  Generally, any in-kind gift valued at greater than $5,000 will require an appraisal, which is paid for by the donor.  Gifts of goods are a meaningful way to help a charitable organization if your gift fits within the organization’s mission. 

Can I donate directly from my IRA account to a charity?

Yes, if you are over 70-1/2, you can give up to $105,000 a year ($210,000 for a married couple if they both meet the qualifications and have separate IRAs) to eligible charitable organizations—this is considered a Qualified Charitable Distribution, or QCD.  If you are 73 or older, you can count this contribution toward your required minimum distribution, which reduces your taxable income.  QCDs are tax-free if sent directly to a qualified charity by the trustee.  You do not claim this as a tax deduction on your tax return since it was paid from pre-tax dollars, so the current standard deduction has no impact on a gift from a retirement account.  You do not even need to itemize deductions to give via a QCD.  Unlike regular charitable contributions that simply need to be mailed by December 31, qualified charitable distribution checks need to be received, cashed by the organization, and the funds transferred from your IRA before December 31, so please set the process in motion as early as possible if you want to make such a contribution this year.    You also cannot get any tangible benefit (for example, buy tickets to a dinner) from the Qualified Charitable Distribution from an IRA. The QCD limit has been indexed to inflation beginning in 2024—it will rise to $108,000 in 2025.    

Why should I donate appreciated securities instead of selling stock and donating the cash?

If you have stocks that have appreciated from their original value, some of the advantages are:

You must have owned the securities for more than a year to take this deduction.  You must actually make the transfer of stock on or before Tuesday, December 31, for it to count for this tax year. It is always a good idea to let the organization know the specific shares that you are transferring so that the donation will be attributed to you and you will be able to get your acknowledgment letter for tax purposes–organizations are often getting multiple stock transfers at year-end and they are not normally notified by the brokerage firm as to who is making the contribution.  Contacting the charitable organization also ensures that the contribution will be directed according to your instructions.  

Check with your tax advisor about the percentage of your adjusted gross income that can be donated for appreciated securities, the percentage is lower than it is for cash contributions. 

If my stock has declined in value, are there tax benefits to transferring securities?

No.  You are better off selling the stock, using the loss to offset gains, and donating the proceeds.

What percentage of my income can I donate and get a tax deduction?

The deductibility limit is generally 60% of a donor’s adjusted gross income for contributions to public charities and public operating foundations.  There are different limits for non-cash gifts, gifts of appreciated securities, and gifts to private foundations, so check with your tax advisor. 

Are the special CARES Act rules for charitable giving still in effect for 2024?

Unfortunately, no, the special rules in 2020 and 2021, allowing contributions up to $300 to be deductible without itemizing deductions, expired in December 2021.  The ability to deduct up to 100% of a donor’s adjusted gross income also expired.

Did the Tax Cuts and Jobs Act of 2017 reduce the charitable tax deduction I can take?

No, the deduction itself did not change, but you can only take a tax deduction if you itemize, and fewer people now itemize because the standard deduction is higher.  For 2024, the standard deduction is $14,600 for single filers and married filing separately, $21,900 for heads of household, and $29,200 for married couples filing jointly. (This is up dramatically from $6,350 for individuals and $12,700 for couples before the Tax Cuts and Jobs Act of 2017 was passed.)  Therefore, if your total actual deduction is not that high, you will likely take the standard deduction and will not itemize, so will not get a charitable deduction for charitable gifts you make.  Even though the expenses that are eligible for deductions include not only charitable contributions but also home mortgage interest and qualified medical expenses, many people do not have enough deductible expenses for them to itemize under the 2017 law. The number of households that took itemized deductions dropped precipitously from 2017 to 2018, and IRS data shows that only about 9% of Americans itemized in 2020, the most recent year for which I can find data.  To take a tax deduction, you have to file form 1040 and complete Schedule A.

One clever strategy I have heard to qualify for the deduction is to “bundle” contributions.  So, if you are giving at say a $10,000 level, and you can afford to, you can give $30,000 one year, so you can itemize and take the deduction, and then skip giving for the next two years. 

What about donor advised funds?

Some donors set up donor advised funds at 501(c)(3) charitable organizations, which may be at community foundations (e.g. New York Community Trust) or at charitable organizations that are related to financial companies (e.g. JP Morgan Charitable Giving Fund).  Donors take the tax deduction in that year and then recommend contributions to charitable organizations for the future from those donated funds.  Donor advised funds receive mixed reviews from the nonprofit world because some donors get the tax deduction and let the funds sit in an account indefinitely rather than directing them to organizations so that they can fulfill their missions.  If you do set up a donor advised fund, I hope you will direct contributions to charitable organizations promptly so that they can put them to work in support of their missions. 

One thing to keep in mind: donors cannot receive a benefit from gifts through donor advised funds, such as tickets to a benefit event.  In the past I interpreted this as meaning that the donor had to pay for the fair market value of a ticket but the deductible portion could be paid from the donor advised fund.  These rules have been tightened (or I had previously misinterpreted them).  The donor cannot pay for a ticket to an event through the donor advised fund at all.  For example, if a ticket to a gala is $350 and the fair market value of the ticket is $150, I had previously accepted the deductible portion, $200, from a donor-advised fund as a contribution.  Now, none of the $350 cannot be paid from donor-advised fund.  Frankly, this makes no sense to me, because it excludes funds that are otherwise considered deductible, but the IRS did not ask my opinion. 

How do I check to see if a charitable organization is legitimate and well run?

This is an important question, as the number of charities has grown tremendously, from under 600,000 public charities in 1998 to more than 1.8 million today. There are a number of agencies that rate charities and provide information on their programs and finances.  I prefer Candid (formerly Guidestar) (candid.org).  Other reputable agencies are Charity Navigator (charitynavigator.org) and the Better Business Bureau  (https://give.org/).

I would caution against going strictly by the numbers.  Some donors looking casually at an organization judge it simply by, for example, the percent of the funds that goes to administration.  If there is an organization that has a mission you support but has higher administrative costs, you really need to drill down further.  It is worth learning if there are special reasons why costs are higher in a given year, for example, that a promising new program was launched that required upfront investment.  Sometimes overhead costs that are too low can indicate that an organization lacks sufficient infrastructure to effectively sustain its programs.

Can I donate real estate to a charitable organization?

Yes, and these gifts can have a transformative impact on charitable organizations. Substantial in-kind gifts such as donating real estate require discussion with the charitable organization and generally require board approval for acceptance.  Nonprofits can and should refuse gifts of property if the costs of maintaining the property would be onerous for the organization or if the donor puts restrictions on the use of the property that do not fit within the mission or strategic direction of the nonprofit. 

What about donating a used car or boat?

If you have a vehicle that you would like to donate, contact the charitable organization to see if it will accept the donation, either directly or through an intermediary that will sell it for the charity.  Many nonprofits have this information on their websites.  Or you can go to the company that handles car donations (at WCC Foundation we use CARS) to see if your desired organization participates or to find an organization that will accept your car donation.  If the charitable organization is keeping the vehicle for its use in fulfilling its charitable mission, you can deduct the fair market value of the vehicle.  In most cases, though, the charitable organization will sell the vehicle, and the deduction is based on how much the charitable organization sells it for.  If the car sells for $500 or less, you can deduct the fair market value of the car or $500, whichever is less—so if for example it has a fair market value of $750 and it sells for $450, you can still take a deduction of $500.  If it sells for more than $500, donors can deduct the actual sale price.  You will need documentation of the gift from the organization. 

What are some other ways to make donations that will help me save on taxes?

If you are—or someone else you would like to provide for financially is—over the age of 65, you can make a contribution while also earning regular income by establishing charitable gift annuities (CGAs).  A typical minimum gift is $10,000.  In return for a transfer of cash, securities or other assets, the organization agrees to make a fixed payment to one or two individuals for their lifetime.  The attractive feature is the immediate tax deduction for a portion of your contribution (if you itemize) and the fixed, high interest rate.  For example, for an annuitant who is 85 years old, the current interest rate is 9.1%.  While $10,000 may sound like a lot, if you have $10,000 in a CD earning around 5% interest, and you would like to support a particular charity, you can donate the funds to establish a CGA and earn a high guaranteed interest rate for the rest of your life—and the interest rate never varies.  The CGA is irrevocable so this is only a good choice if you know you will never need the principal for your living expenses.  If you intend to establish a CGA for this calendar year, please bear in mind that it generally takes at least a couple of weeks to set it up, although it is a simple two-page contract, so don’t delay.  There are also more complex gift vehicles like charitable remainder trusts and charitable lead trusts that require the services of an attorney—and additional time—to establish. 

Keep in mind that it is always wise to speak with your own financial advisor before making any significant financial decisions to make sure that they are in the best interest of you and your family. These points are just one nonprofit professional’s interpretation and are not intended as financial, legal or tax advice.   

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Dolores Swirin-Yao is Executive Director of the Westchester Community College Foundation.  She has had leadership roles in nonprofit organizations for nearly four decades and taught courses in fundraising and nonprofit management at the School of Public Affairs of Baruch College/CUNY.