Charitable giving is a powerful way to support causes you care about, and when structured properly, it can also provide valuable tax benefits. However, not every donation qualifies for a tax deduction. The IRS has detailed rules governing which organizations qualify, what types of gifts are deductible, when contributions must be made, and what documentation is required.
Now that the calendar year has closed, many donors are reviewing their charitable activity as they prepare their 2025 tax returns, while others are beginning to plan charitable giving for 2026. Understanding how these rules apply, both retroactively and prospectively, will help you maximize your tax savings now and in future years.
Below is a practical overview of charitable gifts that may qualify as tax deductions, along with important reminders on timing and substantiation.
Timing Matters: When a Gift Is Deductible
For tax purposes, charitable contributions must be made by December 31 to be deductible for that tax year. Donations completed after year-end apply to the new tax year.
Charitable organizations, including religious organizations and nonprofits, generally have until January 31 to provide donors with required acknowledgment statements for contributions made during the prior year. This administrative deadline does not change the tax year in which a gift is deductible.
What Organizations Qualify?
To be deductible, contributions must be made to a qualified charitable organization recognized by the IRS, including:
- Churches and religious organizations
- Nonprofit schools and hospitals
- Federal, state, and local governments (for public purposes)
- Public charities and private operating foundations
Contributions made directly to individuals, even for compelling personal needs, are not deductible. Donors can confirm an organization’s eligibility using the IRS Tax Exempt Organization Search tool.
Contribution Types
Cash Contributions
Cash gifts remain the most common form of charitable contribution. These include:
- Cash
- Checks
- Credit or debit card payments
- Online or mobile app donations
For donors preparing their 2025 tax returns, cash contributions are deductible only if the payment was completed by December 31, 2025. Donations made in January 2026 will be considered for the 2026 tax year, even if they were intended as part of prior-year planning.
Documentation Tip:
Donors must retain either a bank record or a written acknowledgment from the charity showing the organization’s name, the date of the contribution, and the amount donated. Credit card and online donations are generally deductible in the year the charge is made, even if payment processing occurs after year-end. For additional guidance, see IRS Publication 526, Charitable Contributions.
Non-Cash Contributions
Donations of property may also qualify for a charitable deduction. Common examples include:
- Clothing and household goods
- Furniture and electronics
- Vehicles
- Securities (stocks or mutual funds)
- Real estate or business interests
Non-cash items must generally be in good used condition or better, and the deductible amount is typically the item’s fair market value, not the original purchase price.
For donors claiming deductions on a 2025 return, non-cash contributions must have been delivered or transferred to the charity by December 31, 2025. Items transferred in 2026 apply to the new tax year, regardless of when acknowledgment letters are issued.
Larger non-cash contributions may trigger additional IRS filing requirements and qualified appraisal rules.
Appreciated Assets and Securities
Donating appreciated assets, such as publicly traded stock, can offer additional tax advantages. In many cases, donors may:
- Avoid capital gains tax on the appreciation, and
- Deduct the fair market value of the asset, subject to IRS limits
These contributions remain a valuable planning tool for donors considering charitable gifts in 2026 and beyond, particularly when integrated into a broader tax strategy.
Qualified Charitable Distributions (QCDs)
Taxpayers age 70.5 or older may be eligible to make Qualified Charitable Distributions (QCDs) directly from an IRA to a qualified charity.
When structured correctly, QCDs can:
- Satisfy required minimum distributions (RMDs), and
- Be excluded from taxable income
For 2026 planning, QCDs remain an effective charitable and tax planning strategy.
Documentation Tip
For donors who made QCDs during 2025, proper documentation is essential when preparing tax returns. For churches and charities receiving QCDs, there are still requirements for acknowledging the gift to your organization. Per IRS guidance, include these items in the letter:
- The date of the gift,
- The name of the IRA custodian,
- The amount of the gift,
- That the gift is a qualified charitable distribution,
- That no goods or services were provided in exchange for the gift, and
- That the charitable organization has received the gift for general purposes or a field of interest fund, that it qualifies as a public charity, and the gift is not to a supporting organization or donor-advised fund.
Religious Organizations and Churches: Unique Charitable Gifts
Staff and Clergy Year-End Gifts
Donors may want to give a gift to staff and clergy at year-end as a token of their appreciation. To ensure deductibility for donors, one method is to include year-end gifts to staff and clergy as a budget item. Using this method permits the church to determine amounts to give each person and allows the donor to deduct the gift as being given to a qualified organization. Giving to a specific individual is not allowed if the donor wants to receive a tax deduction.
The budgeted item may be funded from general gifts or a special offering. If the funding comes from a special offering identified for year-end gifts to staff and clergy the church should treat this as a restricted contribution. Any funds from the special offering that are not distributed by the end of the year should be included with restricted net assets for the same purpose in the next year (presuming a calendar year fiscal year).
Benevolence Funds
In compliance with IRS rules, the church cannot accept contributions for specific individuals or families. The church should only accept contributions to the church’s benevolence fund that are not specifically earmarked for a specific individual or family. A best practice is to have a benevolence policy. The policy may permit suggestions of families or persons in need, but ultimately the benevolence committee should have the final approval on who would receive assistance and how much assistance they would receive. Addressing these items in advance is ideal as this allows for intentional consideration of all relevant factors.
Documentation Tip:
IRS requires the following documentation when the benevolence committee provides assistance to individuals or families:
- A complete description of the assistance
- The purpose for which the aid was given
- The organization’s objective criteria for disbursing assistance under each program
- How the recipients were selected
- The name, address, and amount distributed to each recipient
- Any relationship between a recipient, officers, directors, key employees, or substantial contributors to the charitable organization.
The Importance of Proper Documentation: Besaw v. Commissioner
The July 2025 decision by the U.S. Tax Court in Besaw v. Commissioner underscores the importance of strict compliance with documentation requirements, especially regarding non-cash gifts.
In this case, charitable deductions were denied not because the donations failed to occur, but because the taxpayer did not meet substantiation standards. Incomplete records and inadequate descriptions of donated items were sufficient to invalidate the deductions.
Key Takeaway:
Good intentions alone are not enough. Proper documentation is necessary, and deficiencies can result in denied deductions even when contributions are legitimate.
Looking Ahead
January is often a time for donors to gather records, review acknowledgment letters, and prepare tax filings for the prior year. While new charitable gifts made now will apply to the current tax year, ensuring that prior-year contributions are properly documented is just as important.
Because individual circumstances and tax rules vary, donors should consult a qualified tax advisor when claiming significant charitable deductions or planning future giving.
Charitable contributions provide meaningful support to nonprofits and communities—but the tax benefits depend on careful adherence to IRS rules. Whether reviewing prior-year donations or planning new gifts, understanding eligibility, timing, and documentation requirements can help ensure charitable intentions are fully recognized under the tax code.
