Search the term “charitable giving” online, and you’ll come across hundreds (probably thousands) of articles on the tax benefits of donating to your favorite causes. For the average taxpayer (we’re talking about anyone who isn’t Bill Gates, Warren Buffet, or MacKenzie Scott), there’s a common misconception—or perhaps more accurately, an inaccurate overemphasis—on the role charitable donations have on your tax bill.
While, yes, there is typically a tax benefit to supporting nonprofits, is it enough of a benefit that taxpayers should consider giving solely for the tax breaks? Let’s look into it by breaking down the difference tax deductions and credits have on your total tax bill, as well as what strategies you can use to potentially maximize the tax benefits of your charitable contributions.
Before we dive into charitable giving tax benefits and strategies, it may be worth a brief review of the difference between a tax deduction and a tax credit (we’ll get to why this is relevant in a minute).
A tax deduction reduces the amount of income subject to tax (i.e. your taxable income). If you earned $200,000 and your tax deductions equaled $30,000, your total taxable income for the year would drop to $170,000.
We use a progressive tax system, which means portions of your income are taxed at different rates—the higher your taxable income, the higher the rate goes.
Assuming you’re a single filer, let’s take a look at how your $200,000 would be taxed (with no deductions or credits) in 2025:1
| Tax rate | Portion of income subject to each tax rate | Total amount taxed | Total tax liability |
|---|---|---|---|
| 10% | $0 to $11,925 | $11,925 | $1,192 |
| 12% | $11,926 to $48,475 | $36,550 | $4,386 |
| 22% | $48,476 to $103,350 | $54,875 | $12,072 |
| 24% | $103,351 to $197,300 | $93,950 | $22,548 |
| 32% | $197,301 to $200,000 | $2,700 | $864 |
| Total: | $200,000 | $200,000 | $41,062 |
In 2025, assuming no credits or deductions, your $200,000 income would incur a tax bill of $41,062.
Now, let’s recalculate your income and incorporate the tax deduction of $30,000, which drops your taxable income to $170,000.
| Tax rate | Portion of income subject to each tax rate | Total amount | Total tax liability |
|---|---|---|---|
| 10% | $0 to $11,925 | $11,925 | $1,192 |
| 12% | $11,926 to $48,475 | $36,550 | $4,386 |
| 22% | $48,476 to $103,350 | $54,875 | $12,072 |
| 24% | $103,351 to $170,000 | $66,650 | $15,996 |
| Total: | $170,000 | $170,000 | $33,646 |
With $30,000 in tax deductions, you’ll see in the chart above that your total tax bill drops from $41,062 to $33,646—a tax savings of $7,416.
While any tax savings are good, the purpose of demonstrating this is to clarify that tax deductions do not provide a dollar-for-dollar reduction in your tax liability. Rather, they may help you drop the top portion of your income into the next lower tax bracket. They can also help you stay within the income qualification window for certain government benefits, like Medicaid.
A tax credit, on the other hand, does provide a dollar-for-dollar reduction in your total tax bill. Generally speaking, this makes tax credits more valuable than deductions, though it's less common to qualify for them if you're a high earner.
In the example above, let’s say you were able to take $10,000 in tax credits. Once your total tax bill is found to be $41,062, applying the tax credits would drop it to $31,062.
Keep in mind that taxpayers can often leverage a combination of credits and deductions, and both can help you save on your total tax bill—just in different ways.
Eligible charitable contributions are tax-deductible, meaning you can receive a deduction, not a credit, for the amount or fair market value of the assets you donate. The kicker, however, is that you must itemize your deductions in order to claim charitable contributions on your tax return.
Considering the standard deduction is at an all-time high ($15,000 for single or $30,000 for joint filers in 2025), around 90% of filers opt to use it.1,2
If you’re considering making a charitable contribution for the tax benefits, the first hurdle begins with your total itemized deductions. If your deductions do not exceed the standard deduction for the tax year, you may be better off foregoing the charitable contribution deduction and taking the standard one instead.
The other hurdle? A $30,000 donation to charity may be enough to make it worth itemizing your deductions, but as we demonstrated above… it may not yield the major tax savings you’re looking for, since deductions don’t equal dollar-for-dollar savings.
First, note that a gift to an individual, such as a family member, does not count as a charitable contribution. Rather, a “gift” falls subject to estate and gift tax laws.
In order for your donation to be eligible for a tax deduction, you must give to a qualified organization recognized by the IRS. You can use this tool from the IRS to search and verify your intended charity.
Donations can come in all shapes and sizes including:
While you should check with your accountant before making any major moves, the IRS does allow taxpayers to donate and deduct up to 60% of their adjusted gross income (AGI) in any given tax year.3
Yes, you can contribute property and assets to charity, but depending on their value, you may be required to pony up for some additional expenses.
If your “noncash contribution” exceeds $500, you’ll be required to complete a separate tax Form 8283. Now, if your noncash items (or a group of similar items) exceed $5,000 in value, the IRS will require you to obtain a “qualified appraisal.” This appraisal will have to come from someone who meets the IRS’s qualified appraiser requirements, and it must happen within 60 days prior to you donating the item(s) to charity.4
Keep in mind, you are responsible for the costs of hiring and conducting an appraisal in a timely manner. While appraiser rates vary across the country, expect to spend between a couple hundred and a couple thousand dollars on this service—and those costs cannot be deducted as part of your charitable contributions.4
Say you’re donating an item valued at $6,000, and the appraisal costs you $1,000—all in, you’re out $7,000 for a $6,000 tax deduction (if itemized), that may not yield more than a couple hundred in tax savings, depending on your total taxable income.
So by now you may be thinking, “Okay, it sounds like you’re really trying to discourage me from giving to charity.”
And to that we say, not at all! If you’re someone who values philanthropy and enjoys giving generously to others, you should continue prioritizing charitable giving within your financial plan.
Rather, we’ve found that there may to be too much emphasis on the tax benefits of charitable giving, which can be misleading and keep people from focusing on the bigger picture, which is supporting their favorite causes through meaningful donations.
Charitable giving is not the great big tax loophole some make it out to be. Rather, it can be a nice byproduct of giving—not sole reason you and your family choose to give this year.
All of that being said, if you do want to incorporate some tax-minded charitable giving strategies into your financial life, here are a few common ones to consider.
We mentioned earlier that the standard deduction is relatively high—which makes it more difficult to justify itemizing deductions. To combat this, some people choose to “bunch” or “bundle” multiple years’ worth of charitable contributions into one tax year, so they have more to deduct at one time (with the idea it would exceed the standard deduction).
For example, say you’re a single filer who plans on donating $10,000 each year to a qualified charitable organization. In 2025, the standard deduction for standard filers is $15,000.
Rather than make one donation in 2024 and another in 2025, you instead combine your two annual $10,000 donations into the 2025 tax year, for a total of $20,000, which exceeds the standard deduction.
You can still be strategic about when you make these donations. Say you give $10,000 on January 1, 2025 and the other $10,000 on December 31, 2025. As long as the gifts are made within the same tax year, you can take advantage of the bundling strategy.
Some people opt to take bunching a step further by opening a donor-advised fund, or DAF. This is a separate charitable investment account, which is sponsored by a 501(c)(3) non-profit. You can make tax-deductible contributions to the DAF, and then advise the fund on when you’d like donations distributed, and to which organizations.
Just keep in mind there are usually administrative fees involved with managing a DAF, usually based on how much is held in the fund. These fees are not tax deductible.
Some families, typically those with significant generational wealth, choose to establish charitable trusts—either charitable remainder trusts or charitable lead trusts. Depending on which kind is established, a charity will receive ongoing donations from the trust for a set period of time, and the contributions may be tax deductible.
Charitable trusts are complex and can be expensive to establish and maintain. You may want to speak with an estate attorney or tax professional before pursuing this strategy.
If your primary focus is to keep more of your money in your pocket, it’s important to be realistic and strategic with your charitable giving strategy. Deductions don’t offer a one-for-one dollar reduction on your tax bill (as a credit would), and you may end up paying more out-of-pocket to establish and execute your charitable giving plan than you truly save in tax deductions.
There are exceptions to this—like the billionaires who give away hundreds of millions to charity each year. But for most taxpayers, the emphasis should be on fulfilling your desire to give back and support your favorite causes. The potential tax benefits may be a nice bonus, but they shouldn’t be your sole motivation for giving.